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UNIVERSITY   OF    ILLINOIS    LIBRARY   AT  URBANA-CHAMPAIGN 


JUN  3  1975 


SEP  719,'B 


L161  — O-1096 


ECONOMICS  FOR  THE  PEOPLE 


BEING  PLAIN  TALKS  ON  ECONOMICS 
ESPECIALLY  FOR  USE  IN  BUSINESS,  IN  SCHOOLS 
AND  IN  WOMEN'S  READING  CLASSES 


By  R.  R.  BOWKER 


FIFTH  EDI'IION,  REVISED 


NEW  YORK 
HARPER  &  BROTHERS,  FRANKLIN  SQUARE 
1896 


Cop/right,  18B6,  1892,  1896,  by  R.  R.  Bowker. 

J  '  '  'All  rights  reserved. 


[CARfiEGIEM'hBRARYi 


PREFATORY  NOTE. 


This  little  book  was  written  because  there  seemed 
to  be  need  of  it  and  I  could  get  no  one  else  to  under- 
take it.  It  grew  out  of  my  summary  of  Economics, 
"  Of  Work  and  Wealth,"  which  had  developed  from  a 
chapter  in  a  book  yet  uncompleted,  on  "  The  Arts  of 
Life."  It  is  an  endeavor  to  'set  forth  the  principles 
of  Economics  so  as  to  make  them  plain  and  inter- 
esting to  all  readers,  illustrating  them  from  American 
facts,  so  that  at  the  end  of  the  book  the  reader  will 
have  a  fair  knowledge  of  the  economic  history  and 
condition  of  our  own  country.  I  may  add  that  it  is  the 
work  of  a  business  man,  drawn  largely  from  business 
experience.  I  shall  be  obliged  to  any  reader  who  will 
-end  me,  in  care  of  the  publishers  (providing  that  reply 
is  not  usually  expected),  criticisms,  suggestions,  or  in- 
quiries that  may  enable  me  to  make  the  book  more 
useful  should  the  demand  for  it  justify  new  editions.  I 
shall  be  especially  glad  to  know  what  parts  prove  to  be 
hard  to  understand.  I  am  chiefly  indebted,  for  literary 
material,  to  the  works  of  Adam  Smith,  Mill,  F.  A.  Walk- 


iv 


PREFATORY  NOTE. 


er,  Cossa,  Perry,  Ely  ("  Socialism  "),  and  Weeks  ("  Labor 
Differences  "),  and,  for  friendly  revision  of  statements 
or  figures,  to  Messrs.  D.  A.  Wells,  Hadley,  Atkinson, 
Shearman,  and  Henry  George.  I  inscribe  this  little 
book  to  the  Society  for  Political  Education,  in  the  cause 
of  which  it  is  written. 

R.  R.  Bowker. 

New  York,  March,  1886. 


It  has  been  gratifying  that  this  book,  which  was  adopt- 
ed for  use  in  the  Chautauqua  reading- courses  and  in 
many  schools,  has  been  there  and  elsewhere  of  sufficient 
service  to  authorize  successive  editions,  of  which  the 
present  is  the  fifth.  In  this  edition  earlier  figures  are 
replaced  with  those  of  the  1890  census  and  of  later  sta- 
tistical reports,  except  in  cases  where  no  figures  on  the 
special  subject  were  available  later  than  those  given.  I 
am  indebted  especially  to  Edward  Atkinson  for  bringing 
to  present  date  his  useful  calculations.  Again  I  thank 
the  friendly  critics  and  correspondents  who  have  aided 
me  with  suggestions. 

R.  R.  B. 

New  York,  October,  1896. 


CONTE  NTS. 


CHAP.  PACK 

I.  A  Common-sense  Study  for  Everybody   I 

II.  Of  Earning  a  Living,  and  Using  Leisure   7 

III.  Some  Mistakes  about  Economies   15 

IV.  Who  share  in  Producing,  and  what  Becomes 

of  the  Product   22 

V.  How  Value  is  Produced...   28 

VI.  What  Price  Means   37 

VII.  The  Laws  of  Price   43 

VIII.  Markets,  and  the  "Market  Price"   52 

IX.  About  Competition   $9 

X.  Foreign  Trade  and  the  Balance  of  Trade   68 

XI.  The  Nature  and  Use  of  Money   76 

XII.  Gold  and  Silver  as  Standard  Money   82 

XIII.  United  States  Money   89 

XIV.  Paper  as  Money   98 

XV.  Banks  and  Banking!.   107 

XVI.  Land  and  its  Features   116 

XVII.  Of  Pent,  and  the  Possibilities  of  its  Abolition.  129 

XVIII.  Capital  and  Interest   139 

XIX.  Of  Labor,  and  the  Division  of  Labor   150 


vi  CONTENTS. 

CHAP.  PAGB 

XX.  The  Wages  Question   159 

XXI.  The  Rate  of  Wages   167 

XXII.  The  Captain  of  Industry :  the  Direction  of 

Labor   177 

XXIII.  The  Relation  of  Employer  and  Employed....  184 

XXIV.  Of  Co-operation   197 

XXV.  Socialism  and  Coinmunism   207 

XXVI.  Taxation  and  National  Debt   214 

XXVII.  The  Using  of  Wealth — Constanption   229 

XXVIII.  The  Early  History  and  Literature  of  Eco- 
nomics   239 

XXIX.  The  Modern  History  and  Literature  of  Eco- 
nomics  249 

XXX.  "  The  End  of  the  Whole  Matter  "   258 

A  Reading  List  of  Books  on  Economics  271 

Index   275 


ECONOMICS  FOR  THE  PEOPLE. 


L 

A  COMMON-SENSE  STUDY  FOR  EVERYBODY. 

WHEN  I  was  a  boy  I  liked  to  buy  and  sell,  with 
pins  as  "  make-believe  "  money.  Then  I  began  to 
collect  stamps.  I  had  a  friend  whose  father  used 
to  trade  with  South  America  and  had  stacks  of 
musty  old  letters  with  the  rare  "  big  number" 
Brazil  stamps.  Of  course  he  wanted  only  one  of 
a  kind  for  his  collection,  and  was  glad  to  trade  off 
others  for  some  of  my  European  stamps.  I  lived 
in  New  York,  and  there  I  could  get  for  the  big 
Brazils  more  stamps  than  I  gave,  or  could  sell 
them  to  the  dealers  for  money.  Presently  I  hit 
on  a  plan  the  dealers  had  not  then  thought  of.  I 
bought  small  pieces  of  English  and  French  gold, 
and  sent  them  in  letters  to  postmasters  in  the  cot 


2  ECONOMICS  FOR  THE  PEOPLE. 

onies,  asking  them  to  send  me  the  money's  worth 
in  unused  small  stamps.  Some  of  them  I  never 
heard  from,  but  the  others  sent  me  enough  to  pay 
all  the  losses  and  a  profit  besides  when  I  sold  my 
stock  to  the  dealers.  Then  I  opened  correspond- 
ence with  a  Liverpool  stamp -dealer  and  one  in 
Hamburg,  buying  United  States  stamps  to  send 
them.  I  made  quite  a  little  money,  which  I  found 
I  could  put  in  the  savings-bank  so  as  to  get  inter- 
est, and  I  got  a  collection  worth  a  hundred  dol- 
lars, besides  learning  from  the  postage-stamps,  as 
any  thinking  boy  does,  a  good  deal  of  geography 
and  history. 

All  this  was  "  doing  business,"  just  as  men  do 
it.  My  friend  and  I  each  got  what  we  wanted, 
and  each  of  us  gained  by  the  exchange.  This  is 
what  any  two  men  do  in  every  "  business  transac- 
tion," else  they  would  not  take  the  trouble  to  do 
business.  One  or  both  of  them  may  make  a  mis- 
take and  get  less  than  he  bargained  for,  or  find 
the  thing  worth  less  than  he  thought,  but  nei- 
ther trades  unless  he  expects  to  gain  by  it ;  no 
law  in  our  day  compels  any  man  to  sell  or  buy  un- 
less he  wishes.  First,  I  "  swapped  "  or  bartered, 
as  savages  do  before  they  learn  to  use  money; 


A  COMMON-SENSE  S  TUB  Y  FOR  E  VER  YD  OD  Y.  3 

later  on  I  bought  and  sold  for  money ;  then  I 
bought  English  and  French  money  to  do  foreign 
business ;  and  what  I  made  I  put  into  a  savings- 
bank  at  interest.  My  profit  became  the  capital 
which  I  used  to  buy  other  stamps,  from  which  I 
made  more  profit.  When  we  think  about  real 
business,  we  find  that  almost  all  of  it  is  quite  like 
these  transactions.  The  desire  of  every  man  to 
get  more  is  at  the  bottom  of  it  all,  and  all  that 
one  reads  in  the  newspapers  about  capital  and  in- 
terest, value  and  price,  banks  and  panics,  can  be 
thought  out  till  they  are  seen  to  be  just  like  my 
boy  business. 

ECONOMICS  is  the  science  which  deals  with 
these  things.  There  have  been  a  great  many 
definitions  of  it — the  science  of  production,  the 
science  of  wealth,  the  science  of  exchange,  the  sci- 
ence of  gain.  All  these  definitions  come  to  much 
the  same  thing,  for  Economics  tells  how  wealth  is 
produced  by  exchange  of  one  thing  for  another,  in 
which  each  man  gains.  At  the  very  beginning,  a 
man  who  digs  in  the  earth  exchanges  his  work  for 
the  product  he  gets  out  of  the  ground,  and  as 
soon  as  he  can  save  some  of  this  product  wealth 
begins.    So  we  may  also  say  that  Economics  is 


4  ECONOMICS  FOR  THE  PEOPLE. 

the  science  of  work  and  wealth ;  but  whatever  we 
call  it,  and  however  we  define  it,  this  study  is  that 
which  tells  how  and  why  business  is  done,  how  and 
why  men  trade.  For  every  act  of  business  is,  un- 
derneath, a  trade  between  two  men,  exchanging 
goods  or  services  so  as  to  gain. 

The  name  ECONOMICS  (ceco-nemics)  comes  from 
two  Greek  words,  oikia,  the  household  estate,  and 
nemein,  to  manage,  and  means  household  manage- 
ment, or  the  management  of  what  one  owns.  The 
name  Political  Economy  (from  the  Greek  polis, 
city,  which  was  to  the  Greeks  the  same  as  state  or 
nation)  is  also  used,  because  the  wealth  of  nations 
is  only  the  wealth  the  people  own,  put  together, 
and  economic  laws  afe  the  same  for  the  few  or  for 
the  many.  Some  States,  indeed,  as  Massachusetts, 
are  called  in  their  legal  papers  a  Commonwealth. 
Each  home  or  household  earns  so  much  and  spends 
so  much:  the  difference  is  the  wealth  of  that  fam- 
ily; and  the  wealth  of  all  together  makes  the  Com- 
monwealth. 

Economics  has  been  called  "  the  dismal  science," 
because  some  people  think  it  is  uninteresting  and 
hard  to  understand.  But  it  is  really  a  simple  mat- 
ter, and  when  one  understands  it  fairly,  a  great 


A  COMMON-SENSE  STUDY  FOR  EVERYBODY.  5 

many  perplexing  things  become  plain,  and  the 
study  is  very  interesting.  It  is  only  common-sense 
applied  to  business.  The  best  way  to  keep  the 
study  easy  and  interesting  is  to  take  up  the  real 
facts  that  one  reads  of  in  the  newspapers,  and  ask 
one's  self  how  the  economic  law  one  is  studying 
bears  on  them.  I  know  one  teacher  who  reads  his 
class  a  business  article  out  of  the  daily  paper,  and 
then  talks  about  that.  I  know  another  who  tells 
his  boys  to  ask  him  questions  about  every-day  af- 
fairs, and  if  their  questions  show  honest  thinking 
he  marks  them  as  though  they  had  recited  well. 
Or  he  puts  the  names  of  books  or  newspaper  arti- 
cles on  the  black-board,  and  after  his  class  has  had 
time  to  read  them,  makes  them  think  out  whether 
the  writers  are  right  or  wrong.  This  thinking  for 
himself  is  what  every  reader  should  try  to  do. 

Every  boy  who  likes  to  44  swap,"  or  who  means 
some  day  to  earn  his  own  living,  every  young  man 
starting  in  business,  every  girl  who  wants  to  un- 
derstand what  she  hears  men  talk  about  or  what 
she  reads  in  the  papers,  every  woman  who  goes 
shopping  or  who  keeps  house,  ought  to  know  some- 
thing about  Economics.  For  there  is  scarcely  any 
one,  the  richest  or  the  poorest,  old  or  young,  who 


6  ECONOMICS  FOR  THE  PEOPLE. 

is  not  affected  by  economic  laws.  Away  out  on 
a  Western  farm,  for  instance,  the  farmer's  wife 
can't  get  the  new  dress  she  needs.  Why?  Be- 
cause the  corn  her  husband  raised  last  year  brings 
so  little  money  that  he  must  hold  it  over  for  better 
prices,  or  wait  till  he  can  feed  it  out  and  so  sell  it 
in  the  form  of  cattle  or  hogs.  Why?  Because 
railroad  freights  are  so  high,  and  prices  in  Liver- 
pool, and  therefore  in  Chicago,  are  so  low.  And 
freights  and  prices  go  up  and  down  according  to 
those  laws  of  trade  which  Economics  teaches.  The 
whole  world  in  these  days  is  a  great  House-that- 
Jack-built,  the  big  things  and  the  little  things  all 
depending  on  each  other.  And  sometimes,  if  a 
farmer,  for  instance,  knows  these  laws  of  trade,  he 
can  guard  against  mistakes,  just  as  by  looking  at 
a  weather-glass  he  can  save  his  hay  before  a  storm. 
Sometimes,  too,  he  can  help  set  wrong  things  right, 
by  thinking  them  out  and  talking  them  over  and 
casting  his  vote,  perhaps,  for  a  Congressman  who 
thinks  the  right  way. 


II. 


OF  EARNING  A  LIVING  AND  USING  LEISURE. 

The  first  thing  every  one  has  to  do,  when  his 
time  comes,  is  to  earn  a  living.  The  second  is  to 
earn  leisure.  This  is  another  reason  why  young 
people,  in  particular,  should  understand  Econom- 
ics. They  ought  to  desire  to  earn  their  living  in 
the  best  way — that  is  to  say,  in  the  most  honest 
and  surest  way.  And  they  ought  also  to  look  for- 
ward to  using  leisure,  when  they  have  earned  it, 
so  as  to  get  the  most  good  out  of  life. 

Now  this  applies  not  only  to  boys  as  they  be- 
come men,  but  to  girls  as  they  become  women. 
There  are  a  great  many  ways  of  earning  a  living, 
with  the  head  as  well  as  with  the  hands,  and  by 
making  it  easy  for  other  people  to  work,  as  well 
as  by  what  is  commonly  called  working.  Many  a 
girl  has  fairly  earned  her  living  by  making  her 
father  cheerful  for  the  next  day's  business  per- 


8 


ECONOMICS  FOR  THE  PEOPLE. 


plexities,  and  many  a  woman  by  helping  to  make 
others  happy,  or  by  bringing  up  children  who  will 
in  their  turn  do  the  world  good  service. 

For  the  key  to  all  honest  earning  of  a  living  is 
to  do  service.  And  there  are  many  kinds  of  serv- 
ice. The  first  kind  is  that  of  the  men  who  add 
value  to  materials  by  work  and  are  direct  pro- 
ducers. First  of  all  comes  the  work  of  those  who 
get  from  the  earth,  by  hard  labor,  what  Nature  has 
to  give  us — the  farmers,  the  miners,  the  fishermen. 
On  them  everybody  else  depends,  and  they  are 
the  great  body  of  the  people.  The  census  of  1890 
showed  that  there  were  then  62,600,000  people  in 
the  United  States,  of  whom  22,700,000  were  work- 
ers; and  of  these  two-fifths  (8,560,000)  were  farm- 
ers or  farm-hands  and  the  like.  The  387,000 
miners  and  quarrymen  and  60,000  fishermen  should 
be  added  to  them.  Next  comes  the  work  of  the 
manufacturers  and  their  workmen,  who  make  the 
products  of  the  farm  and  of  the  mine  more  valu- 
able by  working  them  into  other  forms,  of  whom 
there  were  over  5,090,000,  or  above  half  as  many 
as  farmers.  The  work  of  the  wagoners,  the  rail- 
road men,  and  the  sailors,  who  carry  crops  and 
manufactures  to  the  place  where  they  are  needed, 


EARNING  A  LIVING  AND  USING  LEISURE.  9 

and  that  of  the  traders  and  bankers,  who  keep 
them  in  store  till  the  time  when  they  are  wanted 
by  buyers,  come  next,  and  in  ''trade  and  trans- 
portation" there  were  3,300,000  engaged  in  1890, 
including  500,000  railroad  employes  and  55,000 
sailors.  Besides  these,  1,900,000  "laborers"  were 
reported  by  the  census,  who  probably  do  this  di- 
rect work. 

The  second  kind  of  service  is  that  of  the  people 
who  work  indirectly  by  helping  others,  who  are 
only  indirect  producers.  There  were  over  3,400,000 
of  these  in  1890,  1,400,000  of  them  domestic  ser- 
vants. The  104,000  doctors,  for  instance,  keep  us 
well,  so  that  we  may  do  our  work  ;  89,000  lawyers 
see  that  justice  is  done,  and  as  many  clergymen 
preach  morality,  without  which  business  could  not 
be  carried  on  ;  79,000  officials  and  employes  are 
employed  to  administer  government,  besides  27,000 
soldiers  and  sailors  to  protect  us;  341,000  teachers 
train  children  to  be  serviceable  men.  In  this  class, 
also,  come  the  great  body  of  women,  many  of  whom 
are  not  classed  as  workers  by  the  census,  and  cannot 
be  taken  account  of  in  Economics,  because  they 
do  not  exchange  their  labor,  though  they  do  a  real 
service  to  their  fellow-beings  and  to  their  country. 


IO  ECONOMICS  FOR  THE  PEOPLE. 

A  third  kind  of  service  is  that  done  by  artists, 
musicians,  and  others  who  serve  us  by  ministering 
to  our  pleasures,  though  they  increase  production, 
if  at  all,  only  by  putting  us  in  better  temper  for 
work.  But  this  also  is  real  service,  and  because 
few  people  have  the  gifts  to  serve  us  in  this  way, 
we  are  willing  to  pay  often  very  high  prices  to 
those  who  can.  As  a  matter  of  fact,  many  call- 
ings, as  that  of  a  writer,  combine  two  or  more  of 
these  kinds  of  service. 

There  are  also  classes  of  men  who  do  not  earn 
a  living,  but  simply  prey  upon  the  other  people. 
Among  these  are  the  thieves  and  other  criminals, 
who  are  supported  in  jails  at  the  cost  of  the  work- 
ing people  who  pay  the  taxes,  unless  they  are 
made  to  do  wholesome  work  inside  the  jails ;  and 
the  paupers  and  beggars  who  can't  or  won't  work ; 
and  the  gamblers  of  various  kinds,  who  get  money, 
not  by  earning  it,  but  by  betting  it  away  from  oth- 
er people's  pockets  into  their  own.  Much  of  the 
"  business"  called  "  speculation  "  is  of  this  sort; 
men  simply  bet  on  what  the  price  of  gold,  or 
stocks,  or  wheat,  or  oil  will  be  a  few  days  hence, 
without  in  any  way  adding  value  to  the  goods, 
just  as  a  man  in  a  gambling  saloon  bets  on  what 


EARNING  A  LIVING  AND  USING  LEISURE.    1 1 

cards  or  dice  will  turn  up  next.  A  man  in  a  west- 
ern city  was  arrested  for  gambling  with  a  "  specu- 
lating machine  99  which  showed  at  the  turn  of  a 
wheel  the  names  of  various  stocks,  or  of  wheat, 
pork,  oil,  etc.,  joined  hap-hazard  with  figures  of 
prices  on  a  great  indicator -board  such  as  stock- 
brokers have  in  their  offices,  so  that  people  might 
bet  on  what  would  come  next.  But  many  men 
"on  the  street"  gamble  in  exactly  the  same  way, 
though  the  law  cannot  reach  them.  Thus  more 
cotton  or  oil  has  been  "sold"  in  New  York  in  a 
single  day  than  the  whole  stock  in  existence,  and 
perhaps  not  a  bale  or  barrel  has  been  touched  at 
all. 

There  is  much  honest  and  useful  business  done 
by  bankers  and  brokers  "  on  Wall  Street,"  but  it 
is  not  of  this  sort.  We  hear  a  great  deal  about 
great  fortunes  made  "on  Wall  Street "  in  this  way 
by  men  who  are  mere  speculators  or  "  railroad 
wreckers,"  but  such  fortunes  are  not  honestly  and 
honorably  made,  and  usually  are  soon  lost  again. 
These  men  do  not  earn  money,  they  only  "pluck" 
others.  No  one  ought  to  desire  to  make  fortunes 
by  gambling  of  any  sort.  Nor  ought  any  one  to 
wish  to  spend  money  without  earning  it,  as  by 


12  ECONOMICS  FOR  THE  PEOPLE. 

holding  any  government  office  which  is  a  sinecure, 
and  drawing  pay  without  doing  work.  And  every 
man  who  inherits  money  ought  to  feel  that  he 
cannot  rightly  spend  it  without  also  working  him- 
self. 

These  are  distinctions  nowadays  very  much  con- 
fused, but  which  ought  to  be  clear  to  every  boy 
or  man  making  his  choice  in  life,  and  to  every 
girl  and  woman  who  knows  business  men.  For  if 
public  opinion,  especially  that  of  women,  called 
such  "  speculation  "  by  its  right  name  of  gambling, 
and  despised  it  accordingly,  the  whole  country  and 
each  person  in  it  would  be  better  off. 

After  a  man  is  earning  his  daily  bread  by  work, 
he  tries  next  to  earn  more  than  he  needs  day  by 
day,  and  this  saving  or  wealth  gives  him  the  right 
to  leisure.  This  is  the  test  of  success.  A  country 
is  prosperous  when  its  people,  by  working  a  few 
hours  in  the  day,  can  have  the  other  hours  "  for 
themselves,''  and  when,  also,  the  men  can  earn  so 
much  that  the  women  and  children  are  spared 
hard  work.  The  women  can  then  use  their  time 
to  make  their  homes  what  they  should  be,  and 
the  children  can  get  the  schooling  which  our  free 
schools  offer  them.    But  this  leisure  is  not  good, 


EARNING  A  LIVING  AND  USING  LEISURE.    1 3 

and  may  be  bad,  if  it  is  not  well  used — if  a  people 
use  their  savings  and  their  leisure  to  get  drunk  or 
to  put  bad  into  life  instead  of  getting  good  out  of 
it.  It  is  for  this  reason  that  education  is  impor- 
tant, so  that  the  man  who  has  earned  leisure  may 
be  fitted  to  enjoy  books  and  pictures  and  music 
and  nature  and  travel  and  all  the  higher  things  at 
their  best.  A  man  who  has  studied  Economics 
and  put  it  to  good  use  is  better  fitted  to  enjoy 
both  his  honest  and  well-chosen  work  and  his  well- 
earned  and  delight -giving  leisure,  and  this  is  a 
great  gain. 

On  the  other  hand,  a  man  who  is  ignorant  loses. 
Ignorance  is  costly.  A  farmer,  for  instance,  re- 
members that  last  year  potatoes  were  very  high, 
so  this  year  he  plants  all  the  land  he  can  in  pota- 
toes. Very  likely  the  price  is  low  and  he  loses 
money.  If  he  had  studied  Economics,  he  might 
have  learned  that  after  a  very  high  price  one  year 
a  great  many  people  rush  in  to  plant  that  particu- 
lar thing,  and  the  price  falls  below  the  average. 
So,  too,  an  ignorant  man  who  is  smart  enough  to 
earn  money  and  leisure  doesn't  know  what  to  do 
with  them.  An  ignorant  servant-girl,  not  knowing 
how  to  read  or  write,  who  had  been  married  by  a 


14  ECONOMICS  FOR  THE  PEOPLE. 

rich  man,  had  to  stay  in  bed  a  good  part  of  the 
day  to  "kill  time."  This  is  an  extreme  case,  but 
there  are  many  men  and  women  who  do  not  enjoy 
life  half  as  much  as  they  might  if  they  had  edu- 
cated themselves  at  the  beginning  so  as  to  make 
the  most  of  their  time. 


III. 


SOME  MISTAKES  ABOUT  ECONOMICS. 

SOME  people  say  that  it  is  not  worth  while  to 
study  Economics  because  it  is  not  exact  in  its  con- 
clusions. That  is,  it  cannot  tell  a  business  man 
that  this  month  will  be  a  good  month  in  which  to 
sell,  and  next  month  a  good  month  in  which  to  buy, 
or  that  he  can  be  sure  to  make  money  by  doing  so- 
and-so.  In  fact,  Economics  is  not  an  exact  science, 
as  arithmetic  is,  in  which  we  know  surely  that  twice 
two  is  four  and  can't  be  anything  else.  But  much 
of  our  knowledge  that  is  of  most  practical  use  comes 
from  studies  which  are  not  exact.  A  farmer  might 
as  well  say  that  he  wants  to  know  nothing  about 
the  weather,  because  he  cannot  be  sure  that  the 
last  week  in  April  will  be  rainy  and  the  first  week 
in  July  hot.  If  he  could  have  a  weather  science 
that  would  tell  him  the  heat  and  rain  and  sunshine 
for  each  day  in  the  year,  then  indeed  he  could 


1 6  ECONOMICS  FOR  THE  PEOPLE. 

plant  with  some  certainty  about  his  crops.  Yet, 
as  a  matter  of  fact,  he  seeks  to  know  all  he  can, 
however  imperfectly,  about  the  weather.  He  re- 
lies surely  on  the  general  facts  that  winter  is  cold 
and  summer  hot,  that  spring  is  seed-time  and  au- 
tumn the  time  of  harvest.  Then  he  seeks  to  learn 
from  his  weather-wise  neighbors  the  signs  of  the 
clouds  and  the  sun,  the  birds  and  the  flowers,  the 
barometer  and  the  weather-glass.  Finally,  out  of 
this  study  of  the  weather  there  comes  a  science,  and 
the  Weather  Bureau  warns  him  of  the  coming  of  a 
great  storm  or  of  a  season  of  drought,  which  it  fore- 
tells from  the  telegraphic  reports  or  from  the  spots 
on  the  sun.  It  cannot  tell  him  that  at  three  o'clock 
Thursday  there  will  be  a  shower  heavy  enough  to 
spoil  his  hay,  but  its  warning  is  nevertheless  a  real 
help.  Millions  of  dollars  have  been  saved  to  the 
farmers  of  this  country  by  the  predictions  of  the 
Signal  Service.  It  is  the  same  with  Economics, 
and  with  many  other  studies.  It  has  its  founda- 
tion facts,  its  general  laws,  its  specific  applications. 
It  is  a  great  help,  but  it  does  not  claim  to  tell  the 
day  and  the  hour  at  which  prices  will  go  up  or 
go  down. 

Others  say  that  it  is  not  worth  while  to  study 


SOME  MISTAKES  ABOUT  ECONOMICS.         I J 

Economics  because  economists  themselves  differ, 
and  "  when  doctors  disagree,  who  shall  decide  ?" 
Yet  it  is  true  in  medicine,  which  is  also  an  inexact 
science,  that  while  two  doctors  may  disagree  as  to 
the  exact  kind  of  sickness  of  a  patient,  and  the 
specific  remedies  that  will  make  him  well,  and  even 
quarrel  desperately  over  "  old  school "  and  "  new 
school,"  yet  doctors  do  agree  as  to  the  general  laws 
of  health  and  of  healing,  and,  despite  all  their  mis- 
takes, do  help  people  to  get  well.  So,  also,  minis- 
ters of  different  denominations  disagree  as  to  doc- 
trines, but  they  agree  as  to  Christianity  and  its 
power  over  life.  The  same  is  true  of  economists : 
all  recognize  the  great  truths,  almost  all  recognize 
the  same  general  laws  ;  there  is  still  much  division 
on  specific  applications. 

But  it  is  also  true  that  schools  which  differ  in 
methods  arrive  at  the  same  results.  The  English  or 
Manchester  school,  as  it  is  called,  taking  up  many 
of  the  ideas  of  the  earlier  French  economists,  and 
including  the  great  Scotch  and  English  economists 
from  Adam  Smith  to  Richard  Cobden,  thought 
most  about  the  great  laws  which  must  be,  and  so 
they  are  called  the  a  priori  or  scientific  economists. 
They  considered  Economics  almost  an  exact  sci- 

2 


1 8  ECONOMICS  FOR  THE  PEOPLE. 

ence,  and  showed  that  because  of  such-and-such 
laws  such-and-such  things  must  come  to  pass.  The 
German  or  "national"  school,  to  which  many  of 
the  later  English  and  American  economists  belong, 
seek  to  find  out  what  has  been  the  historical  expe- 
rience of  nations  as  to  economic  matters,  and  so 
they  are  called  the  empirical  or  historical  econo- 
mists. They  consider  that  even  great  laws  act 
somewhat  differently  as  applied  to  nations  in  dif- 
ferent stages  of  growth,  and  claim  that  we  must 
look  not  only  at  laws,  but  at  historical  events  and 
the  circumstances  of  individual  peoples.  In  their 
view  Economics  is  a  science  only  as  physiology  is 
a  science:  in  both  small  circumstances  influence, 
and  great  events  modify,  great  laws.  Christianity, 
which  is  so  great  an  event  in  history  that  we  date 
everything  from  the  birth  of  Christ,  introduced 
certain  springs  of  action,  like  the  "golden  rule," 
which  have  had  the  greatest  possible  influence 
upon  the  action  of  economic  laws. 

But  the  scientific  and  the  historical  schools  of 
economists,  after  all,  reach  much  the  same  conclu- 
sions and  confirm  each  other's  results.  When  the 
French  merchant  Legendre  was  asked  by  Colbert, 
minister  of  Louis  XIV.,  what  the  Government 


SOME  MISTAKES  ABOUT  ECONOMICS.  19 

should  do  for  the  merchant,  he  answered  "Laisscz 
faire" — "  Let  us  be,"  "  Do  nothing."  This  phrase 
became  the  cry  of  the  Manchester  economists,  who 
said  that  Government  should  do  nothing  to  inter- 
fere with  the  natural  course  of  business.  The  his- 
torical school  studied  the  same  subject  as  a  matter 
of  experience,  and  most  economists  come  to  the 
similar  conclusion  that  a  people  gets  on  best  when 
its  Government  does  only  those  things  which  or- 
dinary business  organization  cannot  do  as  well. 
But  there  is  great  difference  of  opinion  as  to  the 
application  of  this  conclusion — for  instance,  as  to 
whether  Government  can  best  manage  the  tele- 
graph and  railroads.  i 

Still  others  say  that  it  is  not  worth  while  to  study 
Economics,  because  it  is  largely  a  quarrel  about 
words.  This  means  that  economists  have  gener- 
ally given  much  space  to  explaining  what  certain 
words,  such  as  "  wealth,"  "  property,"  "  value,"  and 
the  like,  do  mean,  and  what  they  don't  mean.  When 
" Alice  in  Wonderland"  meets  Humpty  Dumpty, 
he  tells  her  that  he  makes  words  mean  what  he 
wants  them  to — otherwise,  what  is  the  use  of  hav- 
ing them  ?  Perhaps  Humpty  Dumpty  was  mak- 
ing fun  of  economists.    But  a  great  many  words 


20  ECONOMICS  FOR  THE  PEOPLE. 

are  carelessly  used,  and  mean  somewhat  different 
things  to  different  people,  and  it  is  said  that  half 
the  quarrels  in  the  world  have  come  from  misun- 
derstandings about  words.  Therefore  it  is  of  first 
importance  that  a  writer  should  make  clear  how  he 
means  to  use  a  word,  and  that  his  readers  should 
keep  that  meaning  clearly  in  mind.  But  it  is  fool- 
ish to  waste  time  in  quarrelling  with  another  be- 
cause he  uses  a  word  whose  meaning  is  not  ab- 
solutely settled,  in  another  sense  than  that  you 
would  give  to  it.  As  the  science  of  Economics 
progresses,  the  scientific  meaning  of  its  words  be- 
comes more  and  more  settled. 

An  example  is  the  word  wealth,  which  expresses 
the  object  of  Economics.  It  may  be  said  that 
there  are  two  kinds  of  wealth — possible  wealth  and 
actual  wealth,  or  wealth  potential  and  wealth  pro- 
duced. Every  young  man  wTho  has  health,  ability, 
and  skill,  has,  we  often  say,  the  best  capital  for 
life ;  and  so  a  country  which  has  many  such  men 
may  be  said  to  have  great  wealth.  So  it  is  said 
that  every  able-bodied  man  among  the  788,000  im- 
migrants who  came  to  the  United  States  in  1882,  or 
the  279,000  in  1895,  was  worth  $1000  to  the  country. 
A  wise  statesman  ought  to  do  all  he  can  to  promote 


SOME  MISTAKES  ABOUT  ECONOMICS.  21 

good  habits  of  living  among  the  people,  and  to 
encourage  immigration,  for  the  more  workers  the 
more  wealth.  Adam  Smith  used  the  word  wealth 
in  this  broad  sense.  But  this  kind  of  wealth 
cannot  be  exchanged,  and  Economics  cannot  deal 
with  it.  Therefore,  when  modern  economists 
speak  of  wealth,  they  mean  usually  wealth  pro- 
duced,— the  fruits  of  work,  not  the  possibilities  of 
it.  And  most  of  them  do  not  include  in  wealth 
either  natural  resources,  as  land,  which  cannot  be 
increased  or  decreased,  or  mere  evidences  of  debt, 
as  promises-to-pay,  which,  if  burned  up,  would  be 
no  loss  of  real  value.  Wealth  in  this  sense  is 
product,  and  not  the  possibility  or  the  evidence 
of  product. 


IV. 


WHO  SHARE  IN  PRODUCING,  AND  WHAT  BECOMES 
OF  THE  PRODUCT. 

NOTHING  is  produced  except  from  the  land  or 
upon  the  land  (the  water  and  the  air  being  in- 
cluded in  the  economic  sense  of  the  word  land). 
The  owner  of  Land  which  is  farmed,  or  on  which 
a  factory  is  built,  sells  the  use  of  this  land  and  gets 
rent.  Nothing  is  produced  except  by  Work,  and 
the  man  who  sells  the  service  of  his  body  and  its 
skill  gets  wages.  But  without  tools,  or  machinery, 
or  material  to  work  on,  a  worker  has  a  poor  chance ; 
therefore,  to  work  at  the  best  advantage,  Capital  is 
required,  whether  this  capital  is  in  the  shape  of  a 
loan  in  money  or  goods,  or  of  the  use  of  a  factory. 
The  capitalist  lending  the  money,  or  its  equivalent, 
gets  interest.  Further,  there  may  be  a  man  who 
can  also  help  production  a  great  deal — that  is,  who 
can  get  more  things  produced  by  the  same  outlay 
of  land,  or  work,  or  capital,  because  a  fertile  brain 


WHO  SHARE  IN  PRODUCING. 


makes  him  good  at  organizing  or  directing.  This 
director  of  industry,  as  we  may  call  him  (the 
French  use  the  word  entrepreneur,  which  the 
Scotch  economists  translate  "  undertaker"),  wants 
to  be  paid  for  this  service  of  his  Brains,  and  he 
is  usually  the  business-man  who  takes  the  risk  and 
is  paid  by  profit. 

Thus  two  elements  must  enter  into  production, 
Land  and  Labor,  paid  for  by  rent  and  zvages,  and 
two  more  are  found  of  value  in  increasing  product, 
Capital  and  Brains,  paid  for  by  interest  and  profit. 
To  put  it  plainly — 

Land-owner         Use  Land       >n  Rent 


Capitalist       %    Use        "3    Capital  Interest 


Of  course  one  man  may  combine  all  of  these,  or 
any  three,  or  any  two.  A  farmer  may  own  his 
land,  and  do  the  whole  or  a  part  of  the  work  him- 
self, and  buy  his  house  and  tools  and  stock- from 
his  own  savings,  and  direct  everything  according 
to  the  judgment  of  his  own  brains.  But  in  this 
case,  if  he  is  a  successful  farmer,  his  product  must 
bring  enough  to  cover  the  rent  he  would  pay  for 


Wages 


Director 


Service 


Brains     cj  Profit 


24  ECONOMICS  FOR  THE  PEOPLE. 

the  land  if  he  did  not  own  it,  and  day's  wages  for 
himself,  and  the  interest  he  might  get  for  his  sav- 
ings if  they  were  not  invested  about  his  farm,  be- 
sides the  profit  his  good  management,  if  he  is  a 
good  farmer,  gives  him.  If  a  man  does  not  get  this 
much  out  of  his  business  it  does  not  pay.  Some 
years  prices  may  be  up,  and  some  years  down,  but 
if  in  the  long  run  he  fails  to  get  this  much  return, 
he  ought  to  know  the  reason  why.  It  may  be 
poor  land,  or  bad  management,  or  heavy  freights, 
or  too  heavy  taxes,  but,  in  any  case,  he  should 
look  up  the  economic  principles  of  his  business 
and  learn  which. 

Sometimes  a  man  can  wisely  combine  all  these 
four  elements  in  himself,  and  sometimes  he  can- 
not. It  is  sometimes  cheaper  to  rent  land  than  to 
own  it,  though  here  a  great  many  side  considera- 
tions enter  in,  and  a  country  is  better  off  when  its 
people  own  and  cultivate  their  own  farms.  Usually 
a  man  of  brains  can  better  afford  to  hire  men  and 
direct  them,  than  to  work  all  the  time  with  his 
own  hands,  while  men  with  less  brains  are  better 
off,  and  not  worse  off,  because  he  finds  work  for 
them  which  pays  him  a  profit.  The  same  kind  of 
mistake  is  made  by  employers  who  try  to  "  save 


WHO  SHARE  IN  PRODUCING.  2$ 

wages  "  by  employing  too  few  men,  and  by  em- 
ployes who  try  to  get  along  without  allowing  for 
the  usefulness  and  pay  of  brains.  This  has  been 
the  ruin  of  many  "  co-operative  "  enterprises,  in 
which  each  man  wanted  to  share  absolutely  alike, 
and  would  neither  submit  to  nor  pay  for  the  di- 
recting man  who  alone  could  make  a  profit,  and 
who  could  always  get  pay  for  his  brains  some- 
where else.  Capitalists  are  often  willing,  for  in- 
stance, to  pay  this  directing  ability  a  large  fixed 
salary  in  place  of  profit,  and  to  take  the  risk  for 
the  sake  of  the  profit  remaining  after  the  salary  of 
such  a  man  is  paid. 

For  each  of  these  elements  of  production  must 
have  its  share  of  the  product.  Production  is,  of 
course,  the  first  factor  in  Economics ;  without  it 
there  is  nothing  to  exchange,  or  to  share,  or  to 
use.  But  production  only  makes  the  wealth,  or 
the  no-wealth,  of  the  miser  who  hoards.  A  man's 
work,  applied  to  land  or  materials,  produces  his 
keep  and  a  surplus,  and  this  surplus — indeed  all 
the  product  if  a  man  is  not  producing  the  kind  of 
things  he  needs  for  himself — must  be  exchanged. 
When,  by  the  division  of  labor,  one  man  produces 
more  of  one  kind  of  thing  than  he  wants  for  him- 


26  ECONOMICS  FOR  THE  PEOPLE. 

self,  and  another  man  more  of  another  kind  than 
he  wants,  then  Exchange  begins,  wealth  is  realized, 
and  the  whole  machinery  of  Economics  is  set  in 
motion.  Exchange  is,  in  fact,  so  close  to  produc- 
tion that  some  writers  make  both  one  division  of 
Economics.  The  results  of  production  and  ex- 
change must  now  be  shared  among  the  elements 
which  contribute  to  those  results,  in  the  form  of 
rent,  wages,  interest,  and  profit.  This  comes  un- 
der Distribution,  which  division  of  Economics  cov- 
ers some  of  the  most  pressing  questions  of  our 
day.  What  share  the  land-owner,  the  laborer,  the 
capitalist  shall  get,  is  a  question  at  the  bottom  of 
the  social  order,  and  one  of  the  most  satisfactory 
things  in  Economics  is  its  teaching  that  the  work- 
ing population,  who  are  the  body  of  the  people, 
are  surely  and  steadily  getting  in  wages  a  larger 
and  larger  share  of  the  total  product.  Finally, 
product  is  of  no  good  unless  it  is  finally  used  or 
consumed.  Consumption,  the  final  purpose  of  pro- 
duction, is  also  the  last  division  of  Economics. 
This  is  one  of  the  least  studied  but  most  impor- 
tant departments  of  economic  investigation,  since 
the  balance-sheet  of  prosperity  for  every  nation 
and  the  whole  world,  as  well  as  for  each  man, 


WHO  SHARE  IN  PRODUCING.  2  J 

depends  at  last  upon  whether  we  are  "  getting 
ahead"  by  using  what  we  consume  so  as  to  pro- 
duce again  to  good  advantage,  or  are  "  running 
behind  "  by  using  up  product  faster  than  it  is  re- 
supplied.  The  wise  farmer  must  have  an  eye  to 
his  seed ;  so  the  present  must  put  aside  part  of 
the  harvest  of  the  past,  that  there  may  be  har- 
vests also  in  the  future. 


V. 


HOW  VALUE  IS  PRODUCED. 

The  key  to  all  business  is  that  men  want  things 
and  are  willing  to  work  for  them.  When  they  get 
by  work  more  than  they  want  of  one  particular 
thing,  they  desire  to  trade  with  some  one  who  has 
something  else  which  they  want  and  who  wants 
what  they  have,  just  as  a  boy  who  has  gathered 
a  lot  of  chestnuts  is  glad  to  give  half  of  them  for 
a  jack-knife,  if  he  can  find  a  boy  who  has  one  to 
swap.  Now  a  man  may  easily  have  more  than  he 
wants  of  any  one  thing,  but  he  never  gets  more 
than  he  wants  of  everything;  that  is,  no  man  ever 
complained  of  being  too  rich,  nor  can  the  whole 
world  be  too  rich.  General  prosperity  consists  in 
so  directing  production  that  men  can  buy  what 
they  want,  and  so  adjusting  distribution  that  men 
who  want,  and  who  work  to  supply  their  want, 
can  have  power  to  buy. 


JIOW  VALUE  IS  PRODUCED.  29 

The  first  question  then  is,  what  men  want.  The 
answer  to  this  varies  with  the  people  of  whom  we 
are  talking.  Adam  and  Eve  at  first  wanted  noth- 
ing. The  savage  wants  little — and  has  a  hard  time 
getting  that.  The  civilized  man  wants  a  great 
many  things  of  many  different  kinds.  An  Ameri- 
can, accustomed  to  comforts  and  "  modern  im- 
provements,'' wants  a  greater  variety  of  things 
than  men  of  most  other  nations.  A  common 
country  store,  for  instance,  on  its  hardware  shelves 
alone,  offers  at  least  five  hundred  different  kinds 
or  sizes  of  things  ;  and  in  New  York  City  probably 
at  least  a  million  different  articles  are  kept  in  stock 
in  the  different  kinds  of  stores.  A  man's  wants 
depend  upon  the  standard  of  life  of  the  people 
about  him,  and  upon  how  he  himself  lives. 

Of  course  each  man  seeks  to  get  what  he  wants 
as  easily  as  possible.  He  tries  to  get  the  most 
that  he  can,  and  pay  for  it  the  least  that  he  can, 
whether  he  pays  in  money  or  with  work.  If  Farm- 
er Jones  wants  to  sell  his  potatoes,  he  tries  to  find 
the  man  who  will  buy  dearest,  so  that  he  may  get 
the  most  he  can  for  his  summer's  work ;  if  he 
wants  to  buy  potatoes  to  plant,  he  tries  to  find 
the  man  who  will  sell  cheapest.    This  is  the  great 


30  ECONOMICS  FOR  THE  PEOPLE. 

fact  at  the  bottom  of  all  trade.  It  is  the  law  of  self- 
interest. 

For  a  long  time  people  took  it  for  granted  that 
one  man's  gain  must  be  another's  loss,  that  each 
man's  self-interest  was  against  that  of  every  other 
man,  and  that  each  nation's  self-interest  was  against 
that  of  every  other  nation.  This  would  make  trade 
always  a  kind  of  war.  But  when  Adam  Smith, 
in  1776,  the  year  of  the  Declaration  of  Inde- 
pendence, published  "  The  Wealth  of  Nations," 
the  greatest  of  all  the  books  on  Economics,  he 
made  it  very  clear  that  it  was  not  true  that  one 
man  loses  as  another  gains.  This  is  true  in  mere 
speculation,  but  not  in  real  trade.  If  Farmer 
Jones  grows  more  potatoes  than  he  can  use,  and 
wants  money,  but  Doctor  Smith  wants  potatoes 
more  than  the  money  for  which  he  can  buy  them, 
both  gain  by  the  exchange.  Trade  is  a  voluntary 
act,  and  thrives  by  peace  and  not  by  war;  for 
peace  lets  people  do  as  they  choose,  and  war 
makes  them  do  as  the  war -makers  compel  them. 
Therefore  men  nowadays  speak  of  "  enlightened 
self-interest,"  and  see  that  in  free  exchange  both 
sides  gain. 

Anything  that  can  be  exchanged  or  must  be 


HOW  VALUE  IS  PRODUCED.  31 

bought  is  said  to  have  value,  that  is,  power-  in-ex- 
change. Those  things  which  everybody  can  get 
for  nothing,  as  air  and  daylight,  though  they  are 
the  most  useful  things  in  the  world,  are  not  spoken 
of  as  valuable.  Other  things  may  be  very  hurtful, 
as  poison  or  bad  liquor,  but  they  are  nevertheless 
said  to  have  value,  because  people  may  want  them 
and  be  willing  to  pay  for  them.  The  difference 
between  value  and  utility  depends  on  whether  peo- 
ple must  pay  for  things  or  can  use  them  without 
paying  for  them.  Even  air  and  light  may  become 
valuable  ;  in  a  great  public  hall  full  of  people,  each 
of  whom  breathes  many  cubic  feet  an  hour,  air  is 
pumped  in  at  great  cost ;  and  in  the  evening  we 
are  glad  enough  to  pay  for  light,  whether  for  our 
work  or  for  our  pleasure.  In  these  days  we  can 
not  afford  to  save  money  by  going  to  bed  early,  as 
people  used  to  do  in  old  times.  But  nobody  will 
give  anything  for  air  out-of-doors,  or  for  sunlight 
in  daytime,  though  their  utility  is  above  every- 
thing ;  for  any  one  may  have  all  he  can  use  with- 
out paying. 

Even  the  animals  work  for  their  living,  applying 
labor  to  get  what  nature  has  to  give  them.  Those 
who  live  on  flesh  hunt  their  prey,  and  even  the 


32  ECONOMICS  FOR  THE  PEOPLE. 

monkeys,  who  feed  on  nuts,  must  apply  labor  to 
pick  them  off  the  trees  or  from  the  ground.  More- 
over, the  squirrels  store  up  food  for  a  future  time ; 
the  father-birds  carry  it  to  the  place  where  their 
young  need  it;  the  honey-bees  rework  it  into 
honey.  But  man  is  the  only  being  that  barters  or 
exchanges,  and  so  has  to  do  with  value  or  power- 
in-exchange.  There  are  three  ways  of  adding  value 
to  the  materials  which  by  labor  man  obtains  from 
the  earth,  corresponding  to  the  work  of  the  squir- 
rels, the  birds,  and  the  bees.  We  must  have  what 
we  want,  when,  where,  and  how  we  want  it.  Ice, 
for  instance,  is  not  wanted  in  winter,  but  in  sum- 
mer. It  is  not  wanted  up  in  the  Arctic  regions, 
but  in  our  homes.  It  is  not  wanted  in  the  shape 
of  icebergs,  but  in  convenient  pieces  that  can  be 
put  into  ice-boxes.  In  winter,  or  up  by  the  North 
Pole,  or  in  icebergs,  it  is  of  no  value,  we  would 
say.  The  three  kinds  of  added  value,  then,  are 
time -value,  got  by  keeping,  as  when  ice  is  kept 
from  winter  to  summer,  which  is  storage ;  place- 
value,  got  by  moving,  as  when  ice  is  taken  from 
Maine  to  Louisiana,  which  is  transportation  or 
commerce ;  and  form-value,  got  by  reworking,  as 
when  ice  is  chopped  into  convenient  blocks  or 


HOW  VALUE  IS  PRODUCED.  33 

produced  from  water  by  artificial  means,  which  is 
manufacture. 

If  we  think  over  the  work  of  those  who  arc  di- 
rectly producers,  \ve  shall  find  that  it  adds  some 
one  of  these  kinds  of  value  to  what  they  work 
at,  and  sometimes  all  three.  A  farmer  deals  with 
form-value:  he  plants  the  seed  and  cares  for  the 
young  plant,  so  that  Nature,  with  her  machinery 
of  sun  and  air  and  rain,  may  transmute  it  into 
rich  harvests  of  golden  grain  or  rosy  fruit ;  or 
he  feeds  and  fosters  the  young  of  his  stock  un- 
til the  hay  or  corn,  by  this  same  mechanism  of 
Nature,  becomes  flesh  for  food  or  muscle  for  wrork. 
The  wagoners  and  railroad-men  and  sailors  help  to 
add  place-value  by  transporting  the  crops  to  mar- 
ket. The  merchant  and  banker  help  to  add  time- 
value  by  enabling  goods  to  be  kept  till  they  are 
more  in  demand.  The  machinist  who  keeps  a 
machine  in  order  helps  the  machine  to  add  form- 
value  to  its  product ;  and  so  we  may  say,  too,  that 
the  doctor  and  the  household  servant  help  to  keep 
the  human  machinery,  that  is,  our  bodies,  in  good 
working  order,  and  the  lawyers  and  clergymen 
and  Government  officers  keep  in  order  the  social 
machinery  on  which  so  much  depends.    But,  again, 

3 


34  ECONOMICS  FOR  THE  PEOPLE. 

it  is  the  farmer,  the  hunter,  the  miner,  who  do  the 
foundation-work,  and  supply  the  raw  materials  for 
manufacture,  as  each  manufacturing  process  in 
turn  produces  the  material  for  the  manufacture 
next  above  it. 

Value  may  be  taken  away,  as  well  as  added,  in 
each  of  these  three  ways.  Grain  may  rot,  or  it 
may  be  sent  by  mistake  of  judgment  where  it  is 
not  wanted,  or  it  may  be  kept  over  till  the  next 
harvest,  when  prices  are  down.  Thus  a  man  may 
keep  the  very  same  things  from  year  to  year,  and 
become  poorer  and  poorer.  A  man  who  was  rich 
with  a  storehouse  full  of  hops  when  they  were  a 
dollar  a  pound,  is  poor  when  they  fall  to  twenty 
cents. 

There  is  another  kind  of  increase  of  valuey 
however,,  wfyich  is  not  produced  by  work,  but  by 
scarcity.  The  picture  of  a  great  painter,  or  the 
autograph  of  a  great  man,  now  dead,  or  the  few 
existing  postage-stamps  of  a  past  government,  or 
the  few  remaining  bottles  of  the  wine  of  a  certain 
year,  have  this  scarcity-value  from  the  fact  that 
the  thing  cannot  be  reproduced,  no  matter  how 
much  and  how  many  more  people  want  it.  No 
demand  can  increase  its  supply.    And  if  some  of 


HOW  VALUE  IS  PRODUCED.  35 

these  few  things  are  destroyed,  the  others  increase 
greatly  in  power -of- exchange,  just  as,  when  fire 
burns  or  war  destroys  great  quantities  of  food,  the 
power-of-exchange  of  what  is  left  is  much  greater. 
This  scarcity- value,  or,  as  it  is  sometimes  called, 
"  monopoly- value,"  is  one  element  of  value  in 
land. 

Now  there  arc  a  great  many  things,  as  land 
and  houses  and  railroads,  which  can  change  own  - 
ers, but  cannot  change  place.  For  such  things  the 
evidence  of  ownership  is  usually  in  written  papers 
of  some  kind — the  deed  of  land  or  of  a  house,  or 
the  "  shares  "  of  a  railroad  or  manufactory — which 
are  passed  from  the  seller  to  the  buyer.  These 
papers  are  not  in  themselves  wealth,  but  only  evi- 
dence of  the  ownership  of  wealth.  If  an  owner 
does  not  want  to  sell  his  land  or  house,  or  a  com- 
pany its  railroad  or  manufactory,  or  a  man  his 
stock  of  goods,  they  sometimes  issue  another  kind 
of  paper  promising  to  pay  so  much  money  at  a 
certain  time  or  else  transfer  the  goods:  this  is 
called  a  mortgage.  Or  sometimes  a  man  issues 
a  promise  to  pay  money  at  a  future  time,  which 
is  called  a  note.  "  Paper-money  "  is  such  prom- 
ises-to-pay issued  by  a  government.    These  are 


36  ECONOMICS  FOR  THE  PEOPLE. 

not  wealth,  for  they  could  all  be  burned  up  with- 
out reducing  the  real  wealth  of  the  country.  But 
in  speaking  of  how  much  a  man  is  worth,  we  often 
speak  of  them  as  a  part  of  his  property,  and  "  prop- 
erty "  in  this  sense  includes  (i)  natural  elements, 
as  land,  (2)  true  wealth,  which  can  be  destroyed, 
and  (3)  evidences  of  wealth  or  of  debt. 

A  great  mistake  has  often  been  made  in  taxa- 
tion by  overlooking  the  fact  that  there  cannot  be 
two  values  in  one  thing — that  evidences  of  debt 
are  not  wealth.  If  a  house  is  worth  $10,000  and 
is  mortgaged  for  $5000,  the  total  value  is  still  but 
$10,000,  and  only  this  much  can  rightly  be  taxed. 
This  end  can  be  reached  by  not  taxing  the  mort- 
gage at  all,  or  by  taxing  the  mortgage  for  $5000 
and  the  house  for  the  unmortgaged  remainder  6f 
$50000 


VI. 

WHAT  PRICE  MEANS. 

IN  my  boy  days  our  business  transactions  were 
carried  on  with  pins ;  instead  of  swapping  two  pa- 
per whirligigs  for  a  stick  of  licorice,  we  put  the 
price  of  a  whirligig  at  five  pins  and  of  the  licorice 
at  ten  pins.  Price  is  value  expressed  by  some  one 
thing,  and  in  grown-up  business  that  one  thing  is 
usually  money.  When  men  say  that  the  price  of 
wheat  is  a  dollar,  they  mean  that  this  is  the  value 
or  power-in-exchange  of  the  bushel  of  wheat  meas- 
ured in  money.  It  would  be  a  great  trouble  to 
reckon  that  the  value  of  a  bushel  of  wheat  is  half 
a  hat  or  twelve  pounds  of  sugar.  It  is  much  easier 
to  make  a  price  in  dollars  and  cents.  In  fact,  a 
price-list  of  a  hundred  items  in  money  would  re- 
quire 4950  items  if  each  article  were  quoted  in 
terms  of  every  other. 

It  is  very  necessary  to  get  a  clear  idea  of  wrhat 


38  ECONOMICS  FOR  THE  PEOPLE. 

price  really  means,  and  of  what  money  really  is, 
before  going  very  far  in  Economics.  A  great  many 
serious  mistakes  are  made  in  business  and  in  poli- 
tics, because  people  are  so  apt  to  forget  that  as  "it 
takes  two  to  make  a  bargain,"  so  it  takes  two  val- 
ues to  make  a  price — the  value  of  the  thing  priced, 
and  of  the  thing  in  which  it  is  quoted,  that  is,  the 
value  of  the  money.  Wheat  may  be  at  one  time 
the  most  plentiful,  at  another  time  the  scarcest 
thing  in  the  community ;  so  that  if  hats  remain  of 
the  same  value,  a  hat  may  exchange  one  year  for 
three  bushels  and  another  year  for  only  one  bushel 
of  wheat.  But  if  the  value  of  hats  varied  in  the 
mean  time  the  same  way  with  wheat,  a  hat  would 
be  worth  one  bushel  of  wheat  all  along ;  or  if  hats 
varied  in  the  opposite  direction,  and  became  scarce 
while  wheat  became  plenty,  a  hat  might  be  worth 
six  bushels  of  wheat.  If  values  on  both  sides 
stayed  always  the  same,  prices  would  never  change. 
As  a  matter  of  fact,  prices  are  changing  all  the 
time;  sometimes  things  are  "high"  and  some- 
times they  are  "  low." 

Wheat  was  quoted  in  the  New  York  market  as 
high  as  $3.45  a  bushel  (in  1866),  and  as  low  as  61 
cents  (in  1894).    Raw  sugar  reached,  in  1864,  as 


WHA  T  PRICE  MEANS.  39 

high  as  25  cents  a  pound,  but  refined  sugar  could 
be  bought  in  1895  for  cents.  Wool  reached  $1.10 
a  pound  in  1864,  was  as  low  as  25  cents  in  1866, 
reached  67  cents  in  1872,  was  down  to  20  cents  in 
1878,  was  up  to  50  cents  in  1879,  an<J  down  again 
to  21  cents  in  188 1.  These  are,  of  course,  extremes 
of  prices,  and  for  the  war  years  the  prices  are  in 
currency.  Hops  sold  in  1865  as  low  as  10  and  as 
high  as  65  cents  a  pound,  in  1868  as  low  as  5  cents 
and  as  high  as  55  cents,  in  1870  as  low  as  3  cents, 
in  1882  as  low  as  17  cents  and  as  high  as  $1.13. 

The  value  of  all  these  things  depended  upon  sup- 
ply and  demand.  Value,  or  power- in -exchange, 
always  depends  upon  the  relation  of  supply  and 
demand  in  the  market  quoted,  under  free  exchange. 
Of  course  if  a  soldier  in  a  raid,  or  a  government  in 
peace-times,  forces  me  to  sell  a  hat  for  half  a  dol- 
lar in  poor  money,  or  for  whatever  they  choose  to 
give,  or  if  I  myself  choose  to  sell  a  hat  to  a  friend 
for  half  its  value — in  other  words,  to  make  him  a 
present  of  the  other  half — the  transaction  is  not 
exchange  and  affords  no  measure  of  value,  Hops, 
for  instance,  is  a  very  variable  crop,  grown  in  but 
few  spots,  and  dependent  almost  entirely  on  the 
one  use  of  beer-making.    In  1870  the  crop  had 


40  ECONOMICS  FOR  THE  PEOPLE. 

been  very  plentiful  in  Europe  as  well  as  here,  and 
the  supply  was  vastly  above  any  present  demand. 
The  price  went  down  to  3  cents.  In  1882  the  for- 
eign crop  had  failed,  and  our  farmers  got  as  high 
as  $1.13.  This  is  a  crop  whose  success  depends 
so  much  on  the  season  that  no  human  foresight 
can  prophesy  next  year's  values ;  the  farmers  who 
held  over  their  stock,  and  those  who  rushed  into 
the  hop  business,  were  the  next  year  well-nigh 
ruined.  Wool  is  a  steadier  crop,  but  the  passage 
of  a  high  tariff  on  wool  in  1866  induced  so  many 
farmers  to  go  into  sheep-raising  that  the  supply 
greatly  exceeded  the  demand:  in  1868,  4,000,000 
sheep  were  killed  in  this  country  for  mutton,  and 
the  number  of  sheep  in  Ohio  was  reduced  43  per 
cent,  in  three  years.  Again  the  price  went  up ; 
then  the  demand  for  wool  fell  off  by  the  stagna- 
tion of  manufactures,  and  the  price  went  down. 
Here  better  foresight  would  have  saved  much  loss. 
The  variation  in  price  in  these  cases  was  a  real 
variation  in  the  value  of  the  individual  thing. 

When,  however,  prices  in  general  go  up  or  go 
down,  it  may  mean  a  variation  in  the  supply  or 
demand  of  the  things  sold,  as  when  general  dis- 
tress reduces  the  buying  of  a  whole  community ; 


WHAT  PRICE  MEANS.  4 1 

or  it  may  mean  a  change  in  the  power-in-exchange 
of  that  with  which  we  buy,  that  is,  money.  In 
July,  1864,  what  we  called  a  dollar  in  this  country 
would  buy  only  35  hundredths  of  a  gold  dollar,  for 
the  premium  on  gold  made  a  gold  dollar  worth 
2.85  paper  dollars.  Our  dollar  did  not  really  rep- 
resent a  dollar's  worth  of  coin  again  till  December, 
1878.  A  bushel  of  wheat  priced  at  $2.85  currency 
when  gold  was  highest,  would  have  been  priced  in 
gold  at  $1.00  only;  it  seemed  ''high,"  but  was 
really  "  low."  An  English  penny  a  thousand  years 
ago  meant  i-240th  of  a  real  pound  of  silver,  or  22\ 
grains:  it  decreased,  until  since  1600  it  has  meant 
less  than  8  grains.  Again  :  the  same  coin  or  quan- 
tity of  gold  or  silver  had  less  power-in-exchange 
after  the  exploration  of  America  began  to  increase 
the  supply  of  the  precious  metals  in  Europe  than 
it  had  before,  although  one  of  the  reasons  for  the 
use  of  them  as  money  is  because  they  vary  in  real 
value  less  than  anything  else.  Therefore,  when 
we  are  reading  in  history,  or  in  accounts  of  foreign 
countries,  or  in  newspaper  quotations,  about  prices 
and  rates  of  wages,  we  do  not  get  at  the  real  price 
and  real  wage  until  we  have  learned  what  the 
"currency  "  is,  and  how  much  metal- value  and  pur- 


42  ECONOMICS  FOR  THE  PEOPLE. 

chasing  power  it  stands  for.  The  real  test  of 
wages,  for  instance,  is  the  purchasing  power  of  a 
day's  work  at  the  time  and  at  the  place  mentioned. 
When,  in  the  New  Testament,  "  they  received  ev- 
ery man  a  penny,"  they  received  about  16  cents 
of  our  money,  which  was  then  a  fair  day's  wage. 

We  have  to  remember  then,  about  prices,  that 
as  goods  vary  in  quality  and  value,  so  money  va- 
ries in  kind  and  in  power-of-exchange.  There  is 
"  good 99  money  and  there  is  "  bad  "  money — money 
worth  its  face-value  in  metal,  and  so-called  paper- 
money  or  promises-to-pay,  which  may  come  to  be 
worth  nothing.  A  dollar  a  day  in  good  money 
may  be  better  wages  than  three  dollars  a  day  in 
bad,  for  price  is  not  named  in  the  same  kind  of 
dollars  both  times. 


VII. 


THE  LAWS  OF  PRICE0 

11  It  takes  two  to  make  a  bargain."  In  making 
prices  there  are  always  two  sides  —  on  the  one 
hand  the  seller,  representing  the  producer,  and 
offering  the  supply ;  on  the  other  hand  the  buy- 
er, representing  the  consumer,  and  furnishing  the 
demand. 

When  a  man  makes  a  thing  "to  order,"  the  de- 
mand precedes  the  supply,  and  the  two  exactly 
balance.  The  producer  gets  the  cost  of  produc- 
tion, including  the  fair  return  for  his  own  labor 
and  brains.  Thus,  if  a  man  who  usually  earns 
two  dollars  a  day  should  go  into  the  woods,  pick 
up  dry  branches,  and  make  a  rustic  chair,  taking- 
half  a  day's  time  for  the  whole  job,  he  would  ex- 
pect the  price  of  a  dollar  for  the  chair.  Or,  if  he 
paid  another  man  half  a  dollar  to  get  him  the 
wood  (part  of  which  might  be  paid  to  the  owner 


44  ECONOMICS  FOR  THE  PEOPLE. 

of  the  land  on  which  the  wood  was  grown),  and 
used  a  quarter  of  a  day  of  his  own  labor,  he  would 
still  expect  a  dollar.  If  everything  were  made 
"to  order,"  or  if  men  actually  worked,  under  the 
same  conditions,  so  as  to  produce  exactly  what 
was  wanted,  in  the  quantity  wanted,  in  the  place 
and  at  the  time  it  was  wanted,  then  supply  and 
demand  would  balance,  there  would  be  neither 
scarcity  nor  waste,  and  the  actual  price  would  be 
the  cost  of  production.  But  man  is  not  a  perfect 
being,  and  things  do  not  come  out,  in  economics 
any  more  than  anywhere  else,  just  exactly  even. 
If  our  friend  made  his  rustic  chair  in  the  ordinary 
course  of  trade,  and  then  found  that  nobody  want- 
ed the  chair  or  had  the  wherewithal  to  buy  it,  he 
would  get  nothing;  or  he  might  force  a  sale  at 
fifty  cents ;  or,  if  two  men  each  wanted  a  chair 
right  away,  and  there  was  only  this  one  to  be  had, 
he  might  get  two  dollars  instead  of  one.  It  is  the 
relation  of  supply  and  demand  that  determines 
price. 

Nevertheless,  the  basis  of  price  is  the  cost  of 
production.  Prices  cannot,  in  the  long  run,  fall 
below  that,  for  then  producers  would  stop  pro- 
ducing.   Merchants  who  claim  to  sell  everything 


THE  LA  WS  OF  PRICE.  45 

"  below  cost "  are  cheating  either  their  creditors 
or  the  public.  Yet  some  men  or  some  farms  pro- 
duce cheaper  than  others  can.  Which  cost  of  pro- 
duction is  in  this  case  the  basis  of  price? 

Mr.  Smith  is  not  willing  to  pay  Farmer  White 
more  for  potatoes  than  the  price  at  which  he  could 
buy  them  from  Farmer  Gray,  even  though  Farmer 
White's  land  is  poor  and  he  has  had  to  work  twice 
as  hard  as  the  other  farmer;  nor  will  Farmer  Gray 
be  willing  to  take  a  lower  price  than  Farmer  White 
can  get  because  he  raised  the  potatoes  to  better 
advantage.  We  must  sec  how  in  this  case  the 
particular  price  is  made. 

Farmer  White,  Farmer  Gray,  and  Farmer  Black 
all  have  potato  patches.  Farmer  White's  land  is 
poor  for  potatoes,  Farmer  Gray's  middling,  and 
Farmer  Black's  best  of  all.  Farmer  White  has 
therefore  to  put  the  most  work  in,  and  Farmer 
Black  the  least.  Now,  allowing  for  his  land,  and 
the  seed,  and  the  labor  he  hires,  and  his  own  work, 
it  costs  Farmer  Black  35  cents  a  bushel  for  the 
potatoes  he  raises,  Farmer  Gray  40  cents,  Farmer 
White  45  cents.  If  only  as  many  potatoes  arc 
wanted  as  Farmer  Black  and  Farmer  Gray  cr.n 
raise,  Farmer  Gray  must  get  his  cost  of  produc- 


46  ECONOMICS  FOR  THE  PEOPLE. 

tion,  or  40  cents ;  Farmer  Black  will  want  the 
same,  though  he  gets  five  cents  extra  profit ;  and 
Farmer  White  will  say  to  himself  that  it  is  not 
worth  while  for  him  to  raise  potatoes  at  the  dis- 
advantage of  such  a  price,  and  he  will  turn  his 
land  to  some  other  crop.  But  if  the  demand  is 
greater  than  the  two  can  supply,  Farmer  White 
must  be  called  in ;  and  as  it  does  not  pay  him  to 
grow  potatoes  at  less  than  45  cents,  he  will  get 
this  price  and  so  will  the  other  two,  though  now 
Farmer  Gray  makes  five  cents  and  Farmer  Black 
ten  cents  extra  profit. 

This  instance  brings  out  one  of  the  greatest 
general  laws  of  economics  —  that  price  is  based 
on  the  cost  of  production  of  that  portion  of  the 
product  produced  at  the  greatest  disadvantage  at 
which  it  is  worth  while  to  produce.  This  price 
becomes  the  general  price,  and  any  man  whose 
land  or  whose  skill  enables  him  to  produce  cheap- 
er, gets  the  benefit  of  the  difference,  as  we  have 
seen.  This  explains  what  seems  to  most  people 
a  slap  at  common -sense  —  when  economists  say 
that  the  amount  of  rent  does  not  affect  price,  a 
statement  based  on  "  Ricardo's  law  of  rent."  The 
reason  is  nevertheless  simple :  the  price  of  pota- 


THE  LAWS  OF  PRICE.  4; 

toes  is  made  by  the  poorest  ground  on  which  il 
pays  to  grow  potatoes,  and  any  land  that  grows 
more  potatoes  to  the  acre,  or  the  same  number 
with  less  labor,  pays  the  difference  to  its  owner  in 
the  shape  of  rent.  It  is  "  worth  more."  In  like 
manner,  if  a  smart  farmer  by  good  management 
can  make  the  same  kind  of  land  grow  more  pota- 
toes than  his  neighbor,  he  does  not  pay  more 
rent,  but  he  gets  the  difference  in  profit  for  his 
skill.  There  is  nothing  more  important  than  that 
this  law  should  be  generally  and  clearly  under- 
stood. 

How  important  this  law  is  in  the  practical  di- 
rection of  affairs  is  shown  in  the  case  of  the  Span- 
ish treaty  discussed  in  1885.  This  proposed  to 
let  in  sugar  from  Cuba  without  payment  of  duty, 
though  the  duty  on  sugar  from  non-Spanish  coun- 
tries would  still  be  if  to  2\  cents  a  pound  and  25 
per  cent,  ad  valorem.  At  first  thought  this  seemed 
a  good  thing,  as  it  was  supposed  that  Americans 
might  get  their  sugar  nearly  three  cents  a  pound 
cheaper.  But  of  the  2,754,000,000  pounds  of  for- 
eign sugar  used  in  this  country  in  a  year,  Cuba 
sent,  in  1883-84,  1,191,000,000,  Porto  Rico  138,- 
000,000,  and  other  Spanish  possessions  295,000,000 


48  ECONOMICS  FOR  THE  PEOPLE. 

pounds,  and  non- Spanish  countries  1,130,000,000 
pounds.  We  could  not  buy  all  we  wanted  from 
Cuba,  because  not  enough  is  grown  there ;  we 
should  therefore  have  to  buy  from  less -favored 
countries,  whose  sugar  is  imported  under  the  dis- 
advantage of  the  tax,  and  the  general  price  would 
still  have  to  be  high  enough  to  cover  the  tax. 
The  Cuban  growers  would  get  this  general  price ; 
it  would  be  they,  therefore,  and  not  we  Ameri- 
cans, who  would  profit  to  the  extent  of  the  duty; 
unless,  indeed  —  as  happened  in  the  case  of  the 
Hawaiian  treaty  —  a  particular  set  of  Americans 
bought  up  the  sugar  plantations  of  Cuba  on  spec- 
ulation. Then  the  treaty  would  benefit  not  all 
Americans,  but  these  few,  until  Cuba  began  to 
produce  all  the  sugar  we  need,  or  the  cost  of  pro-^ 
duction  in  other  parts  of  the  world  was  lowered 
in  the  competition,  when  the  price  would  fall,  and 
the  speculators  would  lose  in  their  turn. 

As  price,  from  the  side  of  the  seller,  is  based 
upon  the  cost  of  production  of  the  portion  pro- 
duced at  the  greatest  disadvantage  at  which  it  is 
worth  while  to  produce,  so  price,  from  the  side  of 
the  buyer,  is  limited  by  the  desire  for  that  portion 
it  is  least  worth  while  to  consume.    If  Dr.  Smith 


THE  LA  WS  OF  PRICK.  49 

proposes  to  lay  in  ten  barrels  of  potatoes,  he  will 
not  pay  Farmer  White  $5  for  the  five  barrels  he 
must  have,  and  $1  for  the  five  barrels  he  could  get 
along  without,  but  he  pays  for  all  at  the  lowest 
price  at  which  it  is  worth  while  to  buy  any,  and 
beyond  which  no  more  of  this  particular  thing  is 
useful  to  him  at  the  price  named.  This  "  final 
utility"  price,  as  economists  call  it,  determines, 
from  the  buyer's  side,  the  price  of  the  commodity. 

The  instances  of  Dr.  Smith  and  the  farmers  show 
the  great  law  that  there  can  only  be  one  price  in  a 
given  market  for  a  given  thing — that  is,  for  the 
same  quantity  and  quality  of  an  article  selling  un- 
der like  conditions  at  a  given  place  and  time.  A 
starving  man  pays  no  more  for  bread  at  the  baker's 
than  a  man  who  does  not  care  whether  he  eats  an- 
other piece  of  bread  or  not.  A  family  pays  no 
more  for  its  barrel  of  flour  for  bread  because  bread 
is  a  necessity  and  cake  only  a  luxury,  than  for  a 
like  barrel  of  flour  for  cake.  Farmer  White  gets 
no  more  and  Farmer  Black  no  less  for  the  same 
grade  of  wheat  because  it  costs  one  more  than 
the  other  to  raise  it.  And  this  one  price  is  the 
cost  of  that  portion  of  the  supply  produced  at 
the  greatest  disadvantage  at  which  it  is  worth 

4 


50  ECONOMICS  FOR  THE  PEOPLE. 

while  to  produce  the  "final  utility portion  of 
the  demand. 

Price  thus  poises,  like  the  pointer  in  the  old- 
fashioned  pair  of  scales,  at  the  point  where  de- 
mand and  supply  counterbalance  each  other.  The 
seller,  who  cannot  replace  his  product  by  less  la- 
bor, has  no  great  desire  to  sell,  and  the  buyer,  to 
whom  it  is  not  useful  at  any  higher  price,  is  indif- 
ferent about  buying ;  their  desires  are  balanced ; 
they  trade  on  even  terms.  The  limit  on  the  one 
side  is  the  cost  of  production  at  greatest  disadvan- 
tage, below  which  producers  will  not  continue  to 
produce  and  the  supply  stops.  The  limit  on  the 
other  side  is  the  desire  for  the  "  final  utility  "  por- 
tion, beyond  which  consumers  will  not  buy  and 
the  demand  ceases.  The  two  are  the  same,  be- 
cause producers  will  always  sell  as  high  as  pos- 
sible and  consumers  will  always  buy  as  low  as 
possible.  There  is  a  child's  game  in  which  the 
children  say,  "  I  want  this  thing  twenty  kisses." 
That  is  exactly  what  the  potato -buyer  says  to 
himself :  "  I  want  these  potatoes  40  cents ;  I  do 
not  want  them  45  cents."  But  kisses  are  of  un- 
limited supply,  manufactured  to  order  to  meet 
the  immediate  demand.    This  is  not  so  with  po- 


THE  LAWS  OF  PRICE.  5  I 

tatoes  and  most  things.  The  normal  price  is  based 
on  the  single  consideration  we  have  discussed 
above,  just  as  the  normal  temperature  of  winter 
is  based  on  the  relative  position  of  the  sun  and 
the  earth.  But  as  weather  is  a  variation  from  nor- 
mal temperature,  so  market  price  is  subject  to  a 
great  many  variations  from  normal  price,  as  we 
have  yet  to  see. 


VIII. 

MARKETS  AND  THE  "MARKET  PRICE.'9 

A.  T.  STEWART  became  a  great  merchant  large- 
ly because  he  introduced  into  "  shopping  "  the  true 
economic  principles  of  price.  He  told  his  clerks 
to  name  only  "  one  price/'  and  this  was  always 
the  lowest  price  he  would  take.  This  saved  all  the 
waste  of  time  and  trouble  in  the  old-fashioned  hag- 
gling, and  each  buyer  paid  the  same  price  in  cash 
for  the  same  thing.  This  gave  Mr.  Stewart  a  great 
advantage  over  his  rivals,  who  presently  followed 
his  example,  until  now  in  New  York  the  "  one- 
price  "  system  is  the  rule. 

Nevertheless,  it  still  remains  true,  as  John  Stuart 
Mill  points  out,  that  in  the  small  transactions  of 
retail  buying  the  economic  laws  of  price  have  least 
chance  to  act.  A  country  village  often  has  trade 
enough  only  for  one  store,  so  that  there  is  no  com- 
petition price  at  all,  partly  because  buyers  do  not 


MARKETS  AND  THE  u MARKET  PRICE."  53 

know  the  "  market  price  "  at  competing  stores, 
partly  because  it  costs  them  more  to  fetch  their 
purchases  from  a  distant  place  than  to  pay  the 
price  asked  by  the  village  store-keeper.  In  the 
first  case  the  buyer  suffers  because  of  his  igno- 
rance; but  in  the  second  case  the  buyer  has,  after 
all,  little  cause  to  grumble,  because  it  is  evident 
that  the  store-keeper  is  doing  him  a  service.  When 
the  village  grows  large  enough  to  support  two 
stores  selling  the  same  kind  of  goods,  then  compe- 
tition begins  to  act,  and  the  price  obeys  more 
closely  the  general  law.  Even  if  there  are  two 
stores,  the  system  of  getting  credit  often  tics  a 
customer  to  one  of  them,  and  the  store-keeper 
"puts  on  the  price"  without  fear  of  losing  him. 
Or  it  is  a  matter  of  fashion,  or  habit,  to  buy  at 
one  store  rather  than  another.  Above  all,  the 
retail  buyer,  who  cannot  be  an  expert  judge  of 
everything  he  buys,  or  cannot  spare  time  to  test 
everything,  is  willing  to  pay  a  "good  price"  when 
he  is  sure  of  "  good  value  " — in  other  words,  to  pay 
a  premium  for  honesty  and  good  judgment  on  the 
part  of  the  store-keeper.  "  Retail  buying  and  sell- 
ing," says  Professor  Cairnes,  "  is  thus  made  to  rest 
upon  a  moral  rather  than  an  economic  basis." 


54  ECONOMICS  FOR  THE  PEOPLE. 

But  aside  from  this  question  of  retail  buying, 
there  is  in  general  a  difference  between  normal  or 
"  ought  to  bring"  price  and  market  or  actual  price. 
A  dealer  often  says,  "  I  ought  to  get  a  dollar  for 
this,  but  I  will  let  it  go  for  ninety  cents."  If  he 
is  talking  honestly,  he  means  that  the  normal  price, 
the  cost  to  him  and  his  proper  charges,  would  be  a 
dollar,  but  the  market  price  is  only  ninety  cents — 
for  if  he  could  get  somebody  else  to  give  him  more 
than  ninety  cents,  he  would  not  sell  at  less  to  you. 

It  is  very  seldom,  in  fact,  that  the  market  price 
is  exactly  the  same  as  the  normal  price,  although 
values  inevitably  tend  to  the  cost  of  production. 
Moreover,  the  difference  of  time  and  other  condi- 
tions between  the  making  of  an  article  and  the 
selling  of  it,  tends  always  to  make  a  new  normal 
price,  based'  upon  the  cost  of  reproduction,  that  is, 
of  production  now.  It  is  always  the  present 
conditions  of  supply,  the  amount  of  labor  by 
which  an  article  can  be  reproduced  or  acquired 
now — as  by  new  machinery  replacing  hand-labor — 
which  gives  the  basis  for  its  present  power-in-ex- 
change. This  power  depends  upon  the  actual  re- 
lations of  supply  and  demand  —  the  amount  of  a 
given  thing  offered  at  the  price  and  the  amount 


MARKETS  AND  THE  "MARKET  PRICE."  55 

of  it  desired  at  that  price.  If  the  supply  is  short 
the  price  goes  up,  and  the  supply  is  then  likely  to 
be  increased  by  increase  of  production,  or  by  draw- 
ing from  the  stock  or  potential  supply  held  in  other 
markets,  or  withheld  from  market  because  the 
price  was  so  low.  A  market^  in  the  sense  in  which 
economists  use  the  word,  includes  those  who  stand 
ready  in  any  one  place  or  under  like  conditions  to 
buy  or  sell  to  each  other  the  same  lines  of  goods. 
There  is,  for  instance,  one  market,  and  market 
price,  for  wheat  at  a  fanner's  barn-door,  another 
at  the  Western  flour-mill,  another  at  Chicago,  an- 
other at  New  York  among  the  great  grain  dealers, 
another  among  those  who  sell  to  grocers,  another 
between  grocers  and  their  retail  customers;  finally 
there  is  the  great  world's  market  at  Liverpool, 
where  the  wheat  of  America  competes  with  that 
of  India,  and  where  the  prices  that  are  at  the  base 
of  all  other  markets  are  made.  Thus,  if  there  is  so 
much  wheat  from  other  countries  that  only  $1.02 
a  bushel  can  be  had  for  American  wheat  in  Europe, 
the  price  in  New  York  is  likely  to  be  this,  less  cost 
of  transportation  across  the  ocean,  handling  and 
dealer's  charges,  or  say  90  cents,  while  grocers  in 
New  York  would  have  to  pay  say  93  cents,  and 


56  ECONOMICS  FOR  THE  PEOPLE. 

the  purchaser  of  a  single  bushel  98  cents  ;  the  price 
in  Chicago,  the  New  York  price  less  the  cost  of 
getting  it  to  the  seaboard,  say  80  cents ;  the  price 
at  the  mill  or  the  train  still  less.  Each  of  these  is 
a  separate  market,  between  which  the  price  varies 
according  to  the  cost  of  transportation  and  other 
charges.  If  it  should  happen  that  scarcity  in  the 
Milwaukee  market  should  lower  the  supply  below 
the  demand  of  the  flour-mills  there,  prices  might 
go  up  till  it  paid  to  increase  the  supply  in  Mil- 
waukee from  the  stock  in  the  Chicago  market. 

In  all  this  series  of  prices  the  normal  price  should 
be  the  cost  of  producing  the  wheat  plus  the  cost 
of  handling  and  transporting  to  the  country  rail- 
way-station, to  Chicago,  to  New  York,  to  Liver- 
pool. The  real  or  market  price  seems  to  be  made 
the  other  way :  the  farmer  gets  the  price  at  Liver- 
pool less  the  cost  of  transportation  thither.  Yet 
the  contradiction  is  seeming  rather  than  real,  for 
when  the  price  gets  so  low  that  it  "  does  not  pay  " 
farmers  to  raise  wheat,  the  acreage  is  reduced  and 
wheat  has  to  go  up  again.  The  farmer  is  some- 
times told  that  he  ought  to  get  a  better  price  hy 
encouraging  a  "home  market,"  and  not  depend- 
ing on  Liverpool  prices.    But  "  America  feeds  the 


MARKETS  AND  THE  "MARKET  PRICE"  57 

world."  In  the  year  1891-2  we  raised  611,000,000 
bushels  of  wheat,  and  of  this  exported  225,000,000 
bushels  that  we  could  not  eat  at  home  ;  and  if  we 
undertook  to  "  get  along  without  abroad,"  the 
glut  would  sink  prices  out  of  sight. 

The  real  difference  between  normal  and  market 
price  comes  from  what  may  be  called  friction  in 
Economics,  the  actual  failing  from  the  free  condi- 
tions of  production  and  competition  presupposed 
in  theoretical  economics.  (1)  Men  may  already 
have  produced  in  excess  of  current  demand  :  a  stock 
exists.  If  this  suffers  by  keeping,  as  fresh  fruit, 
the  price  falls  almost  without  reference  to  the  cost 
of  producing.  (2)  It  is  not  always  possible  for  pro- 
duction to  respond  at  once  to  an  increased  demand  : 
a  large  "  plant,"  as  costly  mills,  or  time,  or  a  reor- 
ganization of  industry  may  be  necessary.  Prices 
then  rise.  (3)  The  substitution  of  one  article  for 
another  when  prices  are  raised — as  happened  when 
coffee  became  so  high  during  the  war  that  rye, 
dandelion  root,  and  such  things  ground  together, 
were  sold  instead  as  " combination  coffee" — checks 
the  rise  of  prices  beyond  certain  limits.  (4)  Cus- 
tom or  habit  influences  price :  it  is  customary  to 
pay  a  penny  to  a  boot-black  in  London,  and  five 


58  ECONOMICS  FOR  THE  PEOPLE, 

cents  in  New  York.  (5)  The  coinage  system  affects 
price,  particularly  in  small  transactions :  when,  af- 
ter the  war,  the  price  of  blacking  boots  was  lower- 
ed, it  went  from  the  ten-cent  price  to  the  five-cent 
price  ;  all  theatre  and  similar  charges  are  at  "  even  " 
rates  ;  the  pay  of  "  day's  labor  "  usually  rises  or  falls 
by  quarter-dollars  or  dimes.  (6)  The  "tone"  of 
the  market,  the  result  of  moral  and  intellectual  fac- 
tors, dealing  with  the  previous  conditions,  has  per- 
haps the  strongest  influence  of  all  on  the  market 
price  at  any  given  moment.  The  seller  offers  or 
withholds,  the  buyer  purchases  or  declines,  accord- 
ing to  his  judgment  of  present  facts  and  future 
probabilities  of  prices.  Thus  a  rumor  on  the  street, 
a  panic,  become  real  factors  in  price.  In  stock 
speculation  this  cause  alone  leads  to  large  percent- 
ages of  variation  in  price,  while  the  utility  of  the 
wealth  represented  remains  closely  the  same.  It 
is  said  that  prices-once  went  up  "a  point"  on  the 
New  York  Stock  Exchange  just  because  Mr.  Thom- 
as Hughes  ("Tom  Brown  of  Rugby"),  who  was 
visiting  it  as  a  looker-on,  made  a  cheerful  speech. 
All  these  causes  really  affect  price,  aside  from  any 
question  of  good  or  bad  money,  which  nominally 
affects  price  more  than  all. 


IX. 


ABOUT  COMPETITION. 

THE  man  who  makes  two  blades  of  grass  grow 
where  only  one  grew  before  is  set  down  as  a  ben- 
efactor to  the  race.  In  like  manner,  he  is  a  bene- 
factor who  enables  twice  as  much  to  be  bought  at 
the  same  outlay  of  work.  Civilization  is  measured 
largely  by  the.  reduction  of  prices  brought  about 
by  competition.  That  we  buy  better  shoes  at 
three  dollars  a  pair  than  the  last  generation  got 
for  six,  is  one  of  many  facts  which  are  great  mile- 
stones in  human  progress. 

Competition  (from  the  Latin  con,  together,  and 
pctcrc,  to  seek)  means  the  striving  together  of  two 
or  more  rivals  for  the  same  end.  The  man  who 
can  do  more  or  better  work  (or  its  equivalent,  the 
same  work  for  less  money)  gets  the  work  to  do; 
the  trader  who  can  sell  goods  cheapest  gets  the 
business ;  the  improved  method  or  machine  su- 


60  ECONOMICS  FOR  THE  PEOPLE. 

persedes  the  old.  It  is  the  natural  way  of  choos- 
ing the  most  fit.  Thus  the  "  competitive  exami- 
nation "  for  the  Government  service  is  the  means 
of  finding  out  which  of  several  candidates  can  do 
the  people's  work  best.  Competition  in  Econom- 
ics is  the  same  as  the  law  of  the  "  survival  of  the 
fittest,"  or  "  natural  selection, "  in  nature.  It  is  the 
natural  order  of  affairs  by  which  each  man  is  re- 
quired to  work  at  his  best,  and  under  which  each 
man  works  to  his  best  advantage.  The  man 
working  at  the  best  advantage  produces  at  the 
least  outlay  of  labor,  and  therefore  at  the  least 
cost.  Thus  prices  are  reduced.  When  competi- 
tion is  restricted,  a  man  is  prevented  from  doing 
what  he  can  do  best.  Thus  prices  are  raised. 
There  is  less  work  done,  and  nobody  is  better  off. 
The  poorer  worker,  who  thinks  he  gains  by  re- 
stricting the  smarter  man  from  doing  more  than 
he  himself  could  do,  gets  no  more  work,  and  no 
more  money  for  his  work,  and  finally  pays  more 
for  what  he  buys.  He  simply  brings  the  smarter 
man  down  to  his  level,  instead  of  trying  to  be 
smarter  himself.  Competition  has  produced  la- 
bor-saving machinery,  and  labor-saving  machinery, 
after  the  unavoidable  loss  in  changing,  has  reduced 


ABOUT  COMPETITION.  6 1 

prices  and  bettered  the  condition  of  laborers  ev- 
ery time.  Competition  in  trade  has  thrown  out 
unnecessary  middle -men,  who  were  thus  set  at 
work  at  new  production,  and  so  also  has  reduced 
prices  for  the  general  benefit. 

For  instance,  in  the  poor  part  of  a  crowded  city 
there  are  five  groceries,  paying  five  rentals  and 
supporting  five  grocers'  families.  A  new  shop 
sells  goods  a  cent  a  pound  cheaper,  runs  three 
grocers  out  of  business  and  hires  the  other  two 
as  clerks.  The  three,  who  had  been  competing 
with  one  another  as  much  as  they  knew  how,  cry 
out  against  the  evils  of  competition.  But  now  all 
the  poor  people  about  save  money,  and  after  a 
time  the  three  middle-men  begin  to  earn  their  liv- 
ing at  raising  potatoes  instead  of  handling  them, 
and  so  help  to  make  potatoes  still  cheaper.  If 
the  new  grocer  gets  rich,  it  is  by  doing  a  service 
to  the  poor  people  about ;  and  if  he  puts  up  prices 
again,  "  competition  "  will  bring  a  new  rival  for 
the  trade.  All  this  is  what  actually  happens  ;  and 
though  for  the  time  it  is  hard  on  the  men  thrown 
out,  they  also  come  out  right  in  the  end. 

Yet  it  is  often  said,  especially  in  "hard  times/' 
and  by  those  thrown  out  of  work,  that  if  we  could 


62 


ECONOMICS  FOR  THE  PEOPLE. 


only  get  rid  of  competition  we  would  all  be  bet- 
ter off.  That  is  a  mistake  :  a  few  would  be  better 
off,  because  they  would  get  greater  profits  or  high- 
er earnings,  but  the  many  would  be  worse  off,  be- 
cause they  would  have  to  pay  higher  prices,  that 
is,  give  more  labor  for  what  they  buy.  Competi- 
tion, by  reducing  profits  and  the  return  to  capital, 
gives  to  the  great  body  of  wage-earners  an  increas- 
ing share  of  product ;  this  tendency  would  be 
checked,  and  labor  would  suffer  most.  But,  also, 
we  cannot  "  get  rid  of"  competition,  any  more  than 
we  can  get  rid  of  the  law  of  gravitation.  All  nat- 
ural laws  have  their  ill  side :  gravitation,  which 
keeps  us  firm  on  our  feet  so  long  as  we  are  on 
solid  ground,  knocks  us  to  pieces  if  we  attempt 
to  walk  off  a  house-top  or  over  the  opening  of  a 
pit.  It  is  not  the  law,  but  the  attempt  to  ignore 
it,  that  gives  us  trouble.  "  Hard  times"  are  not 
the  result  of  competition,  but  come  rather,  as  we 
shall  later  see,  from  misdirected  production,  une- 
qual distribution,  and  unproductive  consumption. 

The  principle  of  competition  is  abused  when  a 
merchant,  or  a  "  trust,"  or  a  railway,  sells  or  car- 
ries below  cost,  to  crush  out  a  competitor — an 
"  over-competition "  which  invites  bankruptcy, 


ABOUT  COMPETITION.  63 

when  creditors  or  shareholders  pay  the  loss,  and 
reacts  to  bring  about  too  high  prices  afterwards 
on  other  goods  or  rates.  Such  abuse  has  led  to 
the  popular  feeling  against  trusts,  and  to  the  gov- 
ernmental regulation  of  railways. 

The  action  of  the  law  of  competition  is  limited, 
in  respect  to  wages,  by  the  willingness  of  the  la- 
borer  to  work  for  the  compensation  offered.  If  a 
number  of  workers  agree  that  they  are  not  willing 
to  work  below  a  given  price,  that  price  must  be 
paid,  or  the  work  given  up,  unless  other  workers 
can  be  found  willing  to  work  for  less.  Thus  the 
law  of  competition  is  met  by  the  principle  of  asso- 
ciation. It  then  acts  wholesomely  to  keep  up  the 
compensation  of  the  laborer,  just  as  gravitation 
acts  to  keep  up  a  house  built  of  stones  put  to- 
gether  one  on  top  of  the  other.  This  is  the  nat- 
ural offset  to  the  endeavors  of  great  employing 
powers  to  keep  down  the  pay  of  the  human  ma- 
chine. Trades-unions  have  been  one  great  means 
of  accomplishing  this  end,  and  have  thus  support- 
ed the  natural  tendency  of  competition  to  give  an 
increasing  share  to  labor,  against  the  efforts  of  the 
employing  class  to  increase  or  keep  up  profit. 

If,  however,  such  voluntary  combinations,  either 
of  producers  of  goods  or  sellers  of  labor,  go  on  to 


64  ECONOMICS  FOR  THE  PEOPLE. 

restrict  others  from  offering  at  a  lower  price,  or  to 
prevent  the  doing  of  work,  such  enforced  restric- 
tion interferes  with  the  rights  of  others,  and  does 
wrong.  The  artificial  limitation  of  competition 
has  almost  always  resulted  badly.  Combinations 
to  prevent  "  under-  selling  "  seldom  work  perma- 
nently, because  they  are  devices  to  prevent  smart 
men  making  "  large  sales  and  small  profits,"  and 
are  opposed  to  the  natural  order  of  affairs.  On 
the  other  hand,  when  trades-unions  undertake  to 
prevent  less  skilled  laborers  from  working  for  what 
they  can  get,  they  set  up  the  same  kind  of  combi- 
nation of  the  strong  against  the  weak  which  they 
were  organized  to  resist.  Thus,  in  seeking  to  re- 
strict competition  by  equalizing  the  work  of  good 
and  poor  workmen,  and  to  limit  apprenticeship  for 
the  sake  of  keeping  up  the  price  of  labor,  trades- 
unions  do  very  serious  harm  on  one  side,  offset- 
ting their  great  usefulness  on  the  other.  The 
clerk  of  the  chief  criminal  court  in  New  York  has 
said  that  the  great  increase  of  young  criminals  in 
that  city  was  due  not  so  much  to  flashy  literature, 
as  is  usually  supposed,  as  to  the  restriction  of  em- 
ployment for  youths  by  the  refusal  of  the  unions 
to  permit  more  than  so  many  apprentices  to  a  shop. 
A  most  important  natural  limitation  to  competi- 


ABOUT  COMPETITION.  65 

tion  is  in  the  fact  pointed  out  by  Professor  Cairncs, 
that  in  the  stratified  condition  of  modern  society, 
caused  by  division  of  labor,  there  are  many  "  non- 
competing  groups."  The  farmer,  the  mechanic, 
the  merchant,  the  doctor,  cannot  turn  advanta- 
geously to  each  other's  work,  and  so  do  not  under 
any  usual  conditions  compete.  This  holds  true, 
also,  as  Mr.  Mill  has  pointed  out  in  his  theory  of 
international  trade,  between  men  of  different  na- 
tions, separated  by  distance  and  other  barriers, 
and  by  differences  of  race,  of  climate,  and  of  other 
natural  conditions,  prevented  thus  from  free  move- 
ment and  kept  under  differing  conditions  of  work. 

As  a  result  of  the  fact  that  competition  between 
men  of  different  nations  is  not  direct  and  com- 
plete, we  find  that  the  effort  required  to  obtain  an 
imported  article  in  an  importing  country  is  not 
measured  by  the  labor  required  to  produce  it  in 
the  country  of  production,  but  by  comparative 
costs  in  the  two  countries.  Thus  Buenos  Ayres, 
with  its  great  cattle-plains,  used  to  sell  our  mer- 
chants hides,  say  at  half  the  price  at  which  we 
could  produce  a  full  supply  for  ourselves  before 
the  great  cattle-plains  of  our  Far  West  were  used  ; 
but  the  Lynn  factories  could  make  shoes  at  a 

5 


66 


ECONOMICS  FOR  THE  PEOPLE. 


quarter  the  labor  at  which  the  Buenos  Ayres  shoe- 
maker could  make  them.  Thus  our  people,  at  the 
cost  of  half  an  hour's  labor,  could  buy  from  the 
South  American  what  would  otherwise  cost  sev- 
eral hours'  labor.  Foreign  trade  gains  us  certain 
goods  at  much  less  cost  of  capital  and  labor  than 
we  could  make  them  for ;  while,  as  in  all  free  ex- 
change, the  foreigner  also  gains,  because  he  gets 
more  than  he  could  make  for  himself.  By  getting 
from  each  country  the  goods  it  can  produce  best, 
just  as  a  business  man  selects  for  a  clerk  the  man 
with  the  best  head,  and  for  a  porter  the  man  with 
the  strongest  arms,  we  spend  our  money — that  is, 
we  exchange  our  own  work — to  the  best  possible 
advantage. 

The  whole  tendency  of  progress  has  been  to 
break  down  barriers  and  make  communication, 
that  is  trade,  that  is  competition,  more  easy.  For 
this  we  make  roads,  build  bridges,  tunnel  mount- 
ains, dig  canals,  improve  harbors,  breed  beasts  of 
burden,  invent  machines  of  transportation,  such  as 
wagons,  locomotives,  and  ships.  We  learn  foreign 
languages  and  study  the  habits  of  other  people 
with  the  same  purpose  in  view.  That  social  state 
is  the  most  healthful  which  offers  the  widest  eco- 


ABOUT  COMPETITION.  67 

nomic  freedom,  or  chance  to  compete,  consistent 
with  protecting  the  weak  against  the  reckless 
strong.  Years  ago,  however,  nobody  saw  this,  and 
even  now  many  fail  to  recognize  its  truth. 

The  statesmen  of  old  Rome  passed  laws  that 
gold  and  silver  ought  not  to  be  exported — a  sys- 
tem which  Professor  Perry  calls  the  Bullion  sys- 
tem. During  the  Middle  Ages,  and  particularly 
among  French  statesmen,  the  Mercantile  system 
developed,  the  purpose  of  which  was  "  to  sell  to 
foreigners  more  of  our  productions  than  they  will 
sell  us  of  theirs;"  that  is,  to  make  exports  greater 
than  imports,  getting  the  balance  in  gold  and  sil- 
ver. In  1667  the  Protective  system,  of  laying 
tariff  taxes  so  as  to  keep  out  foreign  goods  and 
compel  production  at  home,  came  into  vogue  with 
the  French  protective  decree  of  that  year ;  and  it 
was  not  until  the  eighteenth  century  that  the 
Natural  system  of  free  exchange  began  to  find 
strong  advocates,  of  whom  the  greatest  was  Adam 
Smith.  All  earlier  systems  were  attempts  to  reg- 
ulate prices  and  restrict  competition,  and  were  the 
forerunners  of  the  protective  policy  which,  despite 
the  trend  of  America  for  freedom,  has  long  ruled 
the  United  States, 


X. 


FOREIGN  TRADE  AND  THE  BALANCE  OF  TRADE. 

Two  views  of  foreign  trade  join  issue  in  Eco- 
nomics, under  the  names  of  "  Protection "  and 
"  Free-trade."  The  protective  system  claims  that 
by  raising  prices  through  a  tariff,  or  series  of  taxes 
on  foreign  goods,  a  "home  market"  can  be  devel- 
oped and  new  industries  created  so  as  to  increase 
production,  profits,  and  wages.  The  free-trade  sys- 
tem claims  that  "  the  world's  market  "  is  needed 
for  the  full  development  of  production,  that  we 
cannot  sell  freely  unless  we  are  free  to  buy,  that 
each  man  and  each  nation  should  do  what  he  or 
it  can  do  best,  and  that  obstacles  in  the  way  of 
freedom  of  exchange  misdirect  production  and  de- 
crease wages. 

The  tendency  of  progress  has  been  to  break 
down  barriers  between  nations,  and  no  people 
have  done  more  than  Americans  in  promoting 


FOREIGN  TRADE,— BALANCE  OF  TRADE.  69 

freedom.  The  doctrine  of  "  Protection  "  has  nev- 
ertheless continued  the  economic  policy  of  the 
general  Government,  though  freedom  of  trade  ex- 
ists between  the  States,  as  guaranteed  by  the 
constitution.  Its  aim  is  to  identify  economic 
groups  with  political  divisions,  whether  or  not 
these  correspond  to  race  or  geographical  or  oth- 
er real  divisions,  with  the  purpose  of  making  each 
nation  complete  in  itself  and  independent  of  all 
others  by  "  diversifying  industries,"  as  it  might  be 
if  isolated  from  other  nations  by  war. 

The  "  diversifying  of  industry"  usually  means 
the  promoting  of  manufacture  in  preference  to 
agriculture,  by  admitting  foreign  goods  only  at 
the  disadvantage  of  a  high  tax,  which  raises  the 
price  of  the  "protected"  articles  here,  and  per- 
mits a  profit  which  will  tempt  Americans  to  make 
them.  The  most  favorable  illustration  is  the  silk 
industry  in  America.  The  high  duty  on  silk  goods, 
as  an  article  of  luxury,  during  the  war,  and  the  ab- 
sence of  duty  on  the  material,  gave  a  considerable 
margin  of  profit  to  the  few  silk  factories  then  ex- 
isting, and  two  places,  South  Manchester,  Conn., 
and  Paterson,  N.  J.,  have  been  largely  built  up  by 
the  increase  of  silk  manufacture  since  1861.  The 


yo  ECONOMICS  FOR  THE  PEOPLE 

industry  in  1890  had  472  establishments,  with  $51,- 
000,000  capital,  employing  50,913  hands,  to  whom 
it  paid  $19,680,318  wages,  or  $386  each,  and  pro- 
ducing $69,154,000  (net)  worth  of  goods.  In  the 
fiscal  year  1894-95  we  imported  $31,023,138  worth 
of  silk  goods,  to  which  was  added  $14,739,550  du- 
ties (47-!  per  cent.,  the  rate  being  50  on  silks  and 
45  on  silk-mixtures),  making  the  cost  $45,762,688. 
This  shows  "  Protection  "  at  its  best,  for  American 
silks  are  honestly  mader  their  prices  have  been  re- 
duced, and  South  Manchester  is  one  of  the  most 
creditable  American  towns,  where  the  hands  are 
well  housed,  well  fed,  and  well  cared  for.  As  silk 
is  a  luxury,  no  great  hardship  is  worked  by  an  in- 
creased price,  and  the  Government  gets  revenues 
only  exceeded  by  those  from  wool,  cotton,  sugar, 
and  tobacco. 

The  opponents  of "  Protection  "  would  point  out 
that  the  industry,  nevertheless,  has  not  outgrown 
the  need  of  a  high  duty  (now  50  per  cent,  on  silks) 
and  of  the  higher  prices  that  Americans  must  still 
pay;  that  the  manufacturers,  according  to  the 
complaint  of  the  Women's  Silk  Culture  Associa- 
tion of  Philadelphia,  discourage  another  active  in- 
dustry, that  of  silk  growing,  for  a  duty  "protect- 


FOREIGN  TRADE.— BALANCE  OF  TRADE.  J\ 

ing"  the  material  would  reduce  their  profit;  that 
the  hands  do  not  get  more  wages  than  they  would 
in  non-protected  industries;  and  that  their  total 
wages  are  less  than  half  the  duty  paid  by  the 
American  people  on  foreign  silks,  and  do  not 
equal  the  increase  of  price  paid  on  American  silks, 
which  goes  neither  to  the  Government  nor  to  the 
wage-earner,  but  to  the  manufacturer;  and  that  at 
Paterson  the  industry  has  been  in  great  distress 
and  many  of  the  operatives  at  starvation  point 
An  indirect  bad  effect  is  the  undervaluation  and 
the  weighting  with  dangerous  dye-stuffs  of  im- 
ported silks  promoted  by  the  high  tariff. 

In  fact,  Protection  does  not  affect  the  wages  of 
the  laborer  (except  indirectly,  and  then  often  to 
lower  them  by  the  derangement  of  industry),  but 
rather  the  profit  of  the  director  or  entrepreneur  in 
particular  industries.  To  apply  the  doctrine  to 
labor  would  be  to  levy  head-money  or  prohibit  im- 
migration, and  to  do  this  would  be  to  protect  the 
strong  against  the  weak,  which  is  unnecessary.  It 
is  sometimes  added  to  the  argument  for  "  Protec- 
tion "  that  the  result  of  compelling  the  people  at 
large  to  pay  higher  prices  and  higher  profits  will 
ultimately  be  lower  prices,  as  the  protected  indus- 


72  ECONOMICS  FOR  THE  PEOPLE. 

tries  grow  into  success,  no  longer  need  help,  and 
produce  cheaper.  But,  as  a  matter  of  fact,  few  if 
any  industries  seem  to  have  been  produced  by 
"  Protection ;"  the  industries  which  clamored  orig- 
inally for  five  per  cent,  duty  at  last  demanded  fif- 
ty, and  prices  became  cheaper  only  when  the  mis- 
directed production  broke  down  and  resulted  in 
bankrupt  sales.  The  hospital  patient  who  is  giv- 
en brandy  to  tide  him  over  a  crisis  sometimes  be- 
comes a  sad  drunkard  when  he  comes  out. 

Economists,  with  but  few  exceptions,  have  fa- 
vored "  Free-trade"  and  opposed  " Protection "  on 
the  moral  ground  that  the  taxation  of  the  whole 
community  for  a  part  is  not  just ;  on  the  economic 
ground  that  the  restriction  of  the  freedom  of  pro- 
duction is  disastrous  ;  and  on  the  practical  ground 
that  the  benefits  claimed  as  off-sets  to  these  disad- 
vantages have  not  actually  been  produced.  "  Pro- 
tection" is  opposed  to  revenue,  because  its  pur- 
pose is  to  prevent  the  importations  from  which 
revenue  is  to  be  collected.  A  tariff  for  revenue  is 
thus  the  contrary  of  a  protective  tariff.  Revenue 
begins  when  "  Protection  "  stops.  Recent  Ameri- 
can tariffs  have  been  neither  the  one  nor  the  oth- 
er; in  trying  to  protect  everybody,  as  the  result  of 


FOREIGN  TRADE.— BALANCE  OF  TRADE.  73 

the  "  log-rolling  "  of  each  industry  in  turn,  it  puts 
a  duty  on  the  manufacturer's  materials  while  it 
pretends  to  favor  him,  so  that  many  goods  that 
would  naturally  be  made  here  are  imported,  and 
American  labor  is  robbed  of  so  much  work,  while 
the  American  manufacturers  arc  shut  out  from 
the  world's  market  by  the  high  cost  of  materials. 

Connected  with  the  "  protective  "  theory  of  for- 
eign trade  is  the  misleading  doctrine  about  the 
"  balance  of  trade."  The  balance  of  trade  means 
"the  difference  between  the  value  of  the  exports 
from  and  the  imports  into  a  country,"  and  it  is 
called  "  unfavorable  "  when  imports  of  goods  ex- 
ceed exports.  This  curious  superstition  holds 
that  any  one  country  is  then  in  a  dangerous  finan- 
cial condition.  But  national  prosperity  is  only  the 
sum  of  individual  prosperity  (the  debts  or  loans 
that  are  no-wealth  being  deducted  in  both  cases), 
and  a  man  counts  himself  richer  when,  without 
running  into  debt,  he  gets  in  more  than  he  gives 
out.  The  difference  in  his  favor  is  profit.  This  is 
just  as  true  of  nations.  England's  commerce  is  the 
most  profitable  in  the  world  ;  and  the  "  balance 
of  trade "  is  always  against  England.  The  im- 
ports of  Great  Britain  were,  in  1890,  over  $2,000,- 


74  ECONOMICS  FOR  THE  PEOPLE. 

000,000;  her  exports  over  $1,600,000,000,  a  balance 
of  $400,000,000  " against"  her.  This  would  mean 
an  enormous  profit,  but  for  one  fact  too  easily  for- 
gotten, that  debts  sooner  or  later  have  to  be  paid 
for.  The  men  of  a  nation,  or  the  nation  itself,  may 
be  borrowers  or  lenders  in  other  countries.  The 
men  of  England  have  loaned  a  great  deal  of  money 
to  other  nations,  and  a  good  part  of  her  imports 
are  the  goods  with  which  other  nations  are  paying 
interest  or  debts.  The  balance  of  trade  therefore 
means  very  little  either  way  until  we  look  into  the 
actual  dealings,  financial  as  well  as  commercial, 
that  make  it  up.  The  United  States,  for  instance, 
which  is  a  producer  of  gold  and  silver,  naturally 
exports  the  precious  metals,  which  would  make 
the  balance  of  trade  seem  still  more  "  against  "  us. 
Up  to  1875  our  net  imports  of  merchandise,  with 
the  exception  of  a  few  years  now  and  then,  were 
steadily  greater  than  our  exports,  but  the  great 
harvests  changed  the  current,  and  in  1885  our  im- 
ports were  $620,769,652  and  our  exports  $784,- 
406,414,  these  figures  including  specie  and  bullion. 
The  balance  of  $163,000,000  "in  our  favor"  went 
largely  to  pay  our  debt  held  abroad,  or  to  pay  the 
expenses  of  Americans  travelling  abroad,  or  has 


FOREIGN  TRADE.— BALANCE  OF  TRADE.  75 

come  back  in  specie  when  we  should  have  made 
more  by  importing  goods  which  would  have  paid 
a  profit.  In  1887,  imports  and  exports,  including 
specie  and  bullion,  balanced  at  8752,000,000  each  ; 
in  1888,  our  imports,  of  $783,295,100,  including  spe- 
cie and  bullion,  were  again  greater  than  our  ex- 
ports, of  $742,368,690;  in  1889,  our  imports  of  mer- 
chandise, $745,131,652,  were  about  offset  by  our 
exports,  $742,401,375  ;  but  the  large  exports  of 
gold  and  silver,  $96,641,533,  as  compared  with  im- 
ports, $28,963,073,  made  the  total  exports  $65,- 
000,000  in  excess.  In  1895  our  imports  were 
$776,669,219,  and  our  exports  $920,896,665.  The 
actual  flow  of  goods  must  not  be  confused  with 
mere  book-keeping  of  international  accounts,  in 
which  the  goods  and  bills  of  exchange  sent  each 
way  must  balance.  Were  all  countries  out  of  debt 
and  prosperous,  the  balance  of  trade  would  be 
against  every  nation.  The  mistake  of  the  balance- 
of-trade  doctrine  arose  from  the  so-called  "  com- 
mercial theory"  of  foreign  trade,  which  held  that 
nations  should  in  every  possible  way  be  embargoed 
from  dealing  with  each  other,  wrhereas  Economics 
shows  that,  by  trading,  nations  as  well  as  men  gain. 


XI. 


THE  NATURE  AND  USE  OF  MONEY. 

Everybody  wants  to  "make  money,"  and  few 
think  they  need  any  instruction  as  to  its  "use." 
But  in  this  sense  the  word  money  is  used  in  a 
loose  way  instead  of  the  word  wealth,  and  a  great 
deal  of  harm  has  come  from  this  confusion  of 
terms.  From  it,  indeed,  came  the  notion  that  a 
country  grows  wealthy  in  proportion  as  money  is 
kept  from  going  out  of  it,  and  the  belief  that  Gov- 
ernment can  make  wealth  by  coining  money  or  is- 
suing paper  as  a  substitute  for  money.  Money  is 
simply  that  kind  of  wealth  commonly  current  in 
exchange,  and  whose  terms  are  used  for  valua- 
tions. It  is  peculiarly  useful  as  a  medium  of  ex- 
change and  as  a  measure  of  value,  but  otherwise 
and  for  itself  it  may  be  one  of  the  least  desirable 
forms  of  wealth. 


THE  NATURE  AND  USE  OF  MONEY.  77 

Just  as  a  boy  contrives  "  pin -money"  to  help 
out  his  "  swaps,"  so  the  early  nations  contrived 
money  to  get  rid  of  inconveniences  in  direct  bar- 
ter. The  shoemaker  docs  not  often  want  a  hat 
just  when  the  hatter  wants  a  pair  of  shoes,  nor  can 
the  hatter  conveniently  take  one  shoe  for  his  hat 
or  the  shoemaker  take  two  hats  for  his  pair  of 
shoes.  Money,  as  a  common  medium  of  exchange, 
enables  us  to  do  away  with  the  "  double  coinci- 
dence of  wants  and  possessions,"  for  which  barter 
waits.  We  accomplish  half  our  exchange — that 
is,  the  shoemaker  sells  his  shoes,  and  holds  the 
purchasing  power  in  suspense — that  is,  the  shoe- 
maker keeps  the  money  till  he  wants  a  hat  or 
something  else.  Or,  if  the  shoemaker  sells  on 
credit,  he  uses  the  terms  of  money  to  record  the 
indebtedness  of  the  buyer  in  his  books.  The  use 
of  money,  instead  of  barter,  is  one  of  the  great 
steps  of  progress :  the  seller  can  now  buy  when, 
where,  and  as  he  desires. 

The  first  use  of  money,  then,  is  as  the  common 
medium  of  exchange :  any  one  will  take  it  any- 
where for  any  goods,  and  it  enables  one  to  buy 
as  much  or  as  little  as  he  wants.  It  is  the  high- 
way of  exchange,  enabling  any  producer  to  deal 


78  ECONOMICS  FOR  THE  PEOPLE. 

with  any  consumer,  and  so  fulfilling  the  first  con- 
dition of  wealth,  of  getting  most  for  least  labor. 
Second,  money  becomes  in  this  way  a  common 
measure  of  value,  or  common  "  value  -  denomina- 
tor" by  which  the  values  of  all  other  things  are 
compared.  A  price  -  current  in  money  is  under- 
stood by  all,  and  a  hundred  articles  are  priced  in 
a  hundred  items,  instead  of  in  the  4950  it  would 
take  if  we  priced  each  article  in  terms  of  every 
other.  This  furnishes  a  universal  language  of 
trade.  Third,  money  is  a  standard  of  values,  or 
measure  for  deferred  payments.  This  is  the  use 
in  credit,  which  is  purchase  in  which  payment  is 
put  off.  The  word  comes  from  the  Latin  word 
credo,  "  I  believe,"  for  it  is  given  in  the  belief 
that  the  debtor  will  pay.  A  promise  to  pay  at  a 
future  time  is  expressed  in  terms  of  money  in 
preference  to  other  commodities,  because  people 
understand  this  term  and  because  they  look  upon 
money  as  of  staple  value.  Fourth,  money  becomes 
thus  a  convenient  storer  of  values,  so  that  men  can 
buy  when  they  desire,  now  or  in  the  future,  to  best 
advantage.  There  are  here  two  distinct  kinds  of 
use — one  direct,  as  the  common  medium  in  actual 
use  in  exchange ;  the  other  indirect,  as  a  common 


THE  NATURE  AND  USE  OF  MONEY.  79 

measure,  standard,  and  storer  of  values,  in  which 
not  money  itself  but  its  terms  are  used. 

These  two  kinds  of  use — the  use  of  the  thing 
and  the  use  of  the  name,  or  the  direct  use  and  the 
representative  use  of  money — must  be  kept  very 
clearly  in  mind.  A  farmer  who  says  to  his  boy, 
"Go  to  the  wheat-bin  and  get  me  a  bushel,"  may 
mean  a  bushel  of  wheat  or  a  bushel-measure :  it 
is  important  for  the  boy  to  find  out  which.  The 
word  money  or  the  word  dollar  admits  of  this 
same  double  sense.  There  is  the  same  difference 
between  a  dollar  which  represents  cost  of  produc- 
tion, or  labor -value,  and  a  dollar  which  is  simply 
a  name  printed  on  a  piece  of  paper,  that  there  is 
between  a  "  bushel"  of  wheat  and  a  "bushel" 
measure.  The  one  is  good  in  itself;  the  other  is 
useless  except  so  far  as  it  is  generally  accepted  to 
measure  real  products. 

Different  nations  have  used  different  kinds  of 
wealth  as  the  common  medium  of  exchange,  which 
was  the  use  for  which  money  came  into  being. 
Our  word  ''capital"  comes  from  the  Latin  caput \ 
a  head,  as  does  the  word  "cattle,"  and,  like  "pe- 
cuniary," coming  from  the  Latin  pecunia,  wealth, 
pedis,  a  herd,/^7*,  cattle,  points  to  the  early  use 


80  ECONOMICS  FOR  THE  PEOPLE. 

of  cattle  and  sheep  as  money  by  the  Greeks,  Ro- 
mans, and  Germans.  But  these,  though  they  could 
be  driven  about,  could  not  be  easily  carried  or  di- 
vided ;  and  wheat  was  also  used  by  the  old  nations 
as  soon  as  they  became  farmers  as  well  as  herds- 
men, doubtless  partly  as  "  small  change."  Most  of 
the  barbarous  nations  selected  that  kind  of  wealth 
most  current  (whence  our  word  currency),  most 
easy  to  carry,  and  most  easy  to  handle  in  small  as 
well  as  large  quantities.  Dates  were  used  by  some 
African  tribes,  rock  salt  by  the  Abyssinians,  olive 
oil  by  the  Ionian  islanders,  tea  compressed  in  small 
cakes  by  the  Russians,  tobacco  by  the  early  Amer- 
ican planters.  The  fees  of  the  clerk  of  the  Su- 
preme Court  of  the  United  States,  in  cases  where 
the  Government  is  a  party,  were  long  reckoned,  fol- 
lowing old  Maryland  customs,  in  pounds  of  tobac- 
co, and  settled  according  to  an  old  legal  valuation 
of  tobacco.  All  these  kinds  of  money  recognize 
that  the  sound  basis  for  money- value  is  wealth — 
something  which  has  cost  proportionate  labor. 

In  the  progress  of  civilization  it  was  found 
that  the  metals  were  the  most  convenient  kind 
of  wealth  to  use  as  money.  Iron  was  used  by  the 
Spartans,  lead  by  the  early  Romans  and  early  Eng- 


THE  NATURE  AND  USE  OF  MONEY.         8 1 

lish,  tin  by  Swedes,  Mexicans,  and  other  people, 
copper  or  bronze  by  almost  all  nations.  All  of 
these,  of  course,  cost  a  certain  amount  of  labor  to 
mine  them.  At  last  it  became  settled  that  the 
two  "  precious  metals,"  gold  and  silver,  were  most 
convenient  of  all.  A  third,  platinum,  was  used  for 
a  little  time  in  Russia.  The  two  precious  metals 
meet  every  condition  for  good  money :  they  cost 
such  an  amount  of  labor  as  to  make  them  conven- 
ient to  handle  within  the  common  range  of  buying 
and  selling ;  they  have  utility  as  ornaments  and  in 
many  industrial  arts;  they  are  thus  easily  trans- 
ferable and  universally  acceptable ;  they  arc  al- 
most imperishable,  not  wasting  greatly  either  by 
handling,  or  rust,  or  conversion  into  coin  and  back 
again,  and  their  fusibility  and  ductility  render 
them  accurately  divisible.  These,  with  copper  or 
an  equivalent  as  "  small  change"  or  token  current 
cy,  are  the  money  of  the  trading  world ;  and  as 
gold  possesses  most  of  the  qualities  named  in  even 
greater  degree  than  silver,  there  is  evident  a  ten- 
dency towards  the  use  of  that  metal  as  the  one 
final  standard  among  the  most  civilized  nations. 
The  nature  of  "  paper  -money,"  so  called,  or  sub- 
stitute-money, we  have  yet  to  consider. 

6 


XII. 


GOLD  AND  SILVER  AS  STANDARD  MONEY* 

"  And  Abraham  weighed  to  Ephron  the  silver 
.  .  .  four  hundred  shekels  of  silver,  current  money 
with  the  merchant"  (Genesis  xxiii.  16).  This  first 
record  of  a  business  transaction  shows  clearly  the 
origin  of  metal- money— it  was  so  much  weight 
of  metal.  "  Shekel "  meant  "  a  weight "  (about  half 
an  ounce  Troy),  just  as  the  English  "  pound  "  was 
at  first  a  pound  weight  of  silver.  The  shekel, 
later  on  (Exodus  xxxviii.  24),  was  measured  "  af- 
ter the  shekel  of  the  sanctuary,"  probably  a  stand- 
ard of  weight  kept  in  the  Temple,  like  the  standard 
weights  now  kept  by  each  nation,  by  which  its 
coinage  is  regulated.  But  the  "  shekel  of  gold  " 
came  to  mean  less  weight  than  the  "  shekel  of  sil- 
ver," so  that  a  standard  was  kept  for  each — prob- 
ably a  result  of  just  such  changes  in  the  value  of 
the  two  kinds  of  money  as  we  see  in  later  times. 


GOLD  AND  SILVER  AS  STANDARD  MONEY.  83 

Gold  and  silver  have  been  found  in  almost  all 
countries,  and  they  were  early  used  as  money. 
Men  soon  found  that  it  was  easier  to  count  than 
to  weigh  with  scales.  This  led  to  coinage,  the  mak- 
ing of  pieces  of  metal  of  fixed  weight  and  fineness, 
whose  value  is  shown  by  the  stamp.  The  rude 
Abyssinians  make  their  rock-salt  into  bars  a  foot 
long  and  three  inches  square,  which  serve  the  same 
purpose.  In  the  early  days,  when  all  trading  was 
a  matter  of  honor,  sealed  bags  of  gold-dust  passed 
at  a  fixed  value.  When  public  opinion  made  a 
dishonored  man  a  social  outcast,  there  was  little 
cheating.  Rings  and  the  Chinese  "  cash  "  (dating 
to  2500  B.C.)  were  early  forms  of  metal -money. 
Our  modern  coin,  the  round,  flat  piece,  stamped 
on  both  sides,  is  traced  back  to  the  Greek  Pheidon, 
king  in  Argos,  about  750  B.  C.  The  old  coins  were 
of  irregular  edge,  which  could  easily  be  clipped  or 
filed  ;  the  edge  is  now  "  milled  "  by  a  machine  in- 
vented in  1685,  so  that  modern  coins  are  protected 
against  all  loss  but  wear.  To  make  this  as  little 
as  possible,  an  "  alloy"  of  harder  metal  is  mixed 
with  gold  or  silver — in  the  United  States  coins 
one-tenth  copper  alloy  to  nine-tenths  fine  metal, 
in  the  English  coins  one- twelfth  —  but  only  the 


84  ECONOMICS  FOR  THE  PEOPLE, 

precious  metal  is  reckoned  in  valuing  the  coin. 
In  old  times  a  coigne,  or  wedge,  like  the  printers 
quoin,  was  used  in  stamping,  whence  our  word 
"  coin."  The  Roman  coins  were  made  in  the 
Temple  of  Juno  Moneta,  whence  our  word  "  mint," 
the  factory  where  money  is  coined,  as  well  as  the 
word  "  money  "  itself. 

Gold  and  silver  are  used  as*  money  partly  be- 
cause they  last  longer,  so  that  each  year's  product 
adds  but  a  small  proportion  to  the  existing  stock, 
and  vary  less  in  value  than  almost  any  other 
things.  Nevertheless,  they  have  varied  in  value, 
according  to  supply  and  demand :  at  one  period 
both  together,  when  all  prices,  or  values  of  other 
things  in  money,  rose  as  they  fell ;  in  recent  times 
silver  falling  greatly  relatively  to  gold.  Silver 
had  been  of  equal  value  with  gold  in  some  barbar- 
ous countries.  In  Japan,  when  it  was  opened  to 
foreigners,  it  took  but  four  times  the  weight  in  sil- 
ver to  equal  the  same  weight  in  gold  ;  among  the 
Greeks,  before  Xenophon,  it  took  13-J-;  later,  and 
among  the  Romans,  12  times,  though  it  is  said 
only  9  to  7|-  times  the  weight  of  silver  equalled 
gold  after  the  return  of  Julius  Caesar.  During  the 
Christian  era  the  rate  has  varied  in  different  times 


•  GOLD  AND  SILVER  AS  STANDARD  MONEY.  85 

and  in  different  countries  at  the  same  time,  being 
in  the  early  centuries  about  12^;  later  on  as  high 
for  silver  as  gf  in  England  (1262)  and  in 
Spain  (1500);  in  1 641,  about  12  in  Germany,  13^ 
in  England,  13^  in  France;  in  1724,  14I  in  France, 
15-J-  in  England;  in  the  present  French  coinage 
and  in  the  English  14^,  while  the  market  rate 
for  silver  bullion  has  of  recent  years  ruled  much 
below  15-J-,  and  has  been  as  low  as  32  weights  of 
silver  for  the  same  weight  in  gold. 

It  is  agreed  on  all  sides  that  steady  money  is 
most  important  for  sound  business.  u  Monomct- 
allists "  assert  that  only  one  kind  of  metal  can 
properly  be  used  as  a  standard,  by  preference  gold, 
because  silver  must  always  have  "  ups  and  downs  " 
in  relation  to  gold,  and  first  one  and  then  the  oth- 
er would  be  used  in  business  according  to  which 
was  cheapest,  if  both  were  "  standards."  "  Bimet- 
allists  "  assert  that  the  world  needs  both  gold  and 
silver  for  standard  money,  and  say  that  if  civilized 
countries  would  unite  in  coining  silver  at  a  fixed 
legal  rate  of  15-J  or  16  to  1  gold,  there  would  be 
no  serious  derangement.  Most  economists  favor 
the  single  gold  standard.  The  question  has  been 
made  a  political  one,  and  two  international  con- 


86  ECONOMICS  FOR  THE  PEOPLE. 

ferences  have  been  held  without  reaching  result. 
Great  Britain  and  its  Australian  and  American 
colonies,  Germany,  Sca'nclinavia,  and  Chili,  are  the 
chief  gold  standard  countries,  using  silver  as  "  le- 
gal tender"  only  for  small  sums;  Russia,  India, 
China  and  Japan,  Mexico  and  Central  America, 
use  a  single  standard  of  silver.  The  double 
standard  is  maintained  by  France,  Italy,  Belgium, 
Switzerland,  and  Greece,  which  are  bound  into 
the  "  Latin  Union,"  by  Spain,  and  by  the  United 
States.  Silver,  which  up  to  the  fourteenth  centu- 
ry was  chiefly  used  for  coinage,  seems  to  remain 
the  money  of  the  less  civilized  countries ;  the 
general  tendency  seems  to  be  in  favor  of  a  single 
standard,  and  that  gold. 

But  the  two  metals,  used  as  money,  have  also 
had  their  "  ups  and  downs"  together.  There  was 
in  circulation  in  the  Roman  empire  in  the  time  of 
Christ  (so  Mr.  Jacobs  estimates)  about  $1,790,000,- 
000  gold  and  silver.  With  the  decline  of  the 
empire  and  the  invasion  of  the  Goths  mining 
practically  stopped,  and  the  loss  and  wear  of 
coined  money  reduced  the  stock  in  Europe  by 
the  year  800  to  less  than  $168,000,000,  a  point  at 
which  it  was  kept,  by  the  revival  of  mining,  until 


GOLD  AND  SILVER  AS  STANDARD  MONEY.  87 

the  discovery  of  America  in  1492.  Meanwhile 
money  had  greatly  risen  in  value ;  it  required  only 
£5  10s.  weekly  ($17.50)  for  the  subsistence  of  King 
Henry  VI.  and  ten  retainers  while  prisoners  (1470) 
of  Edward  IV.  The  discovery  of  America  began 
a  new  chapter  in  the  history  of  money;  after  the 
opening  of  the  great  silver  mines  of  Potosi  in 
1545,  and  the  invention  by  a  Mexican  miner  of  the 
process  of  amalgamating  silver  with  mercury,  over 
$10,000,000  yearly  was  sent  to  Europe.  Money 
fell  rapidly ;  the  price  of  corn  rose  in  England 
from  2s.  to  6s.  and  8s.  per  quarter;  prices  general- 
ly rose  fourfold  ;  debts  were  made  almost  nothing; 
and  to  the  ensuing  derangement  and  distress  his- 
torians trace  the  beginning  of  English  pauperism, 
and  those  money  troubles  of  Charles  I.  which  led 
to  the  great  rebellion. 

About  1809  Europe  had  $1,900,000,000  metal- 
money  in  circulation,  but  the  Spanish-American 
revolutions  reduced  the  silver  supply,  and  the 
product  of  the  Ural  gold-mines,  opened  in  1823, 
did  not  make  good  the  loss,  so  that  in  1829  the 
stock  was  down  to  $1,566,000,000.  The  discover- 
ies of  gold  in  California  (1848)  and  Australia  (185 1) 
again  changed  the  face  of  things.  The  annual  yield 


88  ECONOMICS  FOR  THE  PEOPLE. 


of  gold  and  silver,  over  two  thirds  gold,  while  be- 
fore it  had  been  two  thirds  silver,  rose  to  $190,- 
000,000  and  over.  It  is  estimated  that  the  com- 
mercial countries  had  in  1895  $8,000,000,000 
coin  and  bullion,  about  half  gold,  of  which  the 
United  States  had  $636,000,000  gold  and  $624,- 
000,000  silver;  France,  $850,000,000  gold  and 
$487,000,000  silver;  Great  Britain,  $580,000,000 
gold  and  $115,000,000  silver;  and  Germany,  $625,- 
000,000  gold  and  $215,000,000  silver.  The  open- 
ing of  the  Nevada  and  Colorado  mines  has  in- 
creased the  relative  production  of  silver ;  out  of 
the  world's  product  (1895)  of  $203,000,000  gold 
and  $226,000,000  silver  (U.  S.  coinage  value),  the 
United  States  supplied  $46,000,000  gold  and  $72,- 
000,000  silver,  or  one  third.  Silver  in  the  London 
market  has  fallen  as  low  as  32  to  1.  But  the  great 
increase  in  money  seems  to  have  been  offset  by 
the  increased  productive  activity  brought  about 
by  machinery  and  by  other  causes. 

Variations  in  prices  from  period  to  period  have 
led  economists,  and  particularly  Professor  Jevons, 
to  urge  the  use  of  a  "  tabular  or  multiple  standard 
of  value  "  for  deferred  payments,  made  by  averag- 
ing the  prices  of  articles  of  common  use. 


XIII. 


UNITED  STATES  MONEY. 

DURING  our  war,  when  metal-money,  and  par- 
ticularly "  change,"  was  very  scarce  —  so  that  we 
used  postage-stamps  and  afterwards  "  postal  cur- 
rency," representing  five  or  ten  or  twenty-five  or 
fifty  cents*  worth  of  postage-stamps — a  good  many 
shopkeepers  issued  copper  tokens  "  good  for  one 
cent,"  which  passed  current  as  money.  Many  of 
them  were  not  good  for  a  cent,  and  were  never 
redeemed  by  the  issuers.  Probably  in  the  early 
days  of  coinage,  private  people  thus  made  coins. 
But  now  only  nations  do  so,  for  "the  public  faith" 
is  the  best  surety  that  coins  contain  so  much  metal 
of  such  a  fineness,  or  will  be  good  for  the  money's 
worth,  and  coinage  is,  as  Jefferson  said,  "  peculiarly 
an  attribute  of  sovereignty."  Counterfeiting  was 
once  punished  in  England  as  treason,  by  death ; 
it  is  punishable  in  this  country,  in  the  case  of 


OO  ECONOMICS  FOR  THE  PEOPLE. 

United  States  notes,  by  fifteen  years  imprison- 
ment. It  is  recognized  as  one  of  the  most  seri- 
ous crimes  against  property,  because  it  under- 
mines the  very  foundation  of  sound  business,  hon- 
esty in  weights  and  measures.  Even  were  good 
metal  used,  coining  by  individuals  is  by  law  a 
misdemeanor. 

The  Constitution  gives  to  Congress  the  power 
"to  coin  money,  regulate  the  value  thereof  and  of 
foreign  coin,  and  fix  the  standard  of  weights  and 
measures/'  and  denies  to  the  States  power  to  "  coin 
money ;  emit  bills  of  credit ;  make  anything  but 
gold  and  silver  coin  a  tender  in  payment  of  debts." 
A  clause  giving  Congress  the  power  to  "  emit  bills 
on  the  credit  of  the  United  States  "  was  struck 
out  in  the  debates,  to  avoid,  as  was  said  in  the 
debates,  even  a  "  pretext  for  a  paper  currency,  and 
particularly  for  making  the  bills  a  tender  either 
for  public  or  private  debts."  The  Continental 
Congress  in  1785  unanimously  adopted  as  the 
money  unit  the  "  dollar,"  the  name  coming  through 
the  Spanish  "  dollar  "  from  the  German  "  thaler, 
or  "  Joachimsthaler,"  the  Joachim  thai  or  dale 
being  the  seat  of  great  silver-mines  where  ounce- 
pieces  were  coined.  The  law  establishing  the  mint, 
1792,  provided  for  a  silver-dollar  unit  of  416  grains, 


UNITED  STATES  MONEY.  91 

37li  grains  of  it  fine  metal,  and  a  gold  "  eagle  "  or 
ten -dollar  piece  of  270  grains,  247^  grains  fine 
("  the  proportionate  value  of  gold  and  silver  "  be- 
ing defined  "as  15  to  1,  according  to  quantity  in 
weight  "),  besides  other  gold,  silver,  and  copper 
coins.  In  1834  and  1837,  changes  were  made,  the 
later  law  providing  for  coin  ^  fine,  the  silver  dol- 
lar weighing  412^  grains  and  the  gold  eagle  258 
grains.  The  present  coins  are  :  of  gold,  the  double- 
eagle  ($20),  eagle  ($10),  half-eagle  ($5),  and  quarter- 
eagle  ($2-|),  the  gold  dollar  (not  coined  since  1890) 
being  the  money  unit  with  a  standard  weight  of 
25.8  grains;  of  silver,  the  dollar,  half-dollar,  quar- 
ter-dollar, and  dime  ;  of  base  metal,  the  five  and  one 
cent  pieces.  The  law  of  1853  provided  that  half- 
dollars  and  other  subsidiary  silver  coins  should  con- 
tain but  384  grains  gross  weight  to  the  dollar,  and 
made  a  seigniorage  charge  of  one  half  of  one  per 
cent. — afterwards  reduced.  From  1873  to  1878  the 
silver  "  trade-dollar"  of  420  grains  (378  fine  metal) 
was  struck,  chiefly  for  foreign  trading.  It  was  a 
legal-tender,  by  an  oversight  in  the  law,  up  to  five 
dollars,  till  1876,  when  its  legal-tender  character 
was  repealed.  In  1883  Government  declined  to 
receive  it  at  full  value,  people  began  to  realize  that 


92  ECONOMICS  FOR  THE  PEOPLE. 

it  did  not  contain  a  dollar's  worth  of  silver,  and  it 
fell  to  about  85  cents.  In  1873  the  gold  dollar 
of  25.8  grains  gross  weight  was  made  "  the  unit  of 
value/'  In  1878  Congress  passed  over  the  veto  of 
President  Hayes  the  Bland-Allison  Act,  providing 
for  a  "  standard  silver  dollar"  of  412-I  grains  as 
an  unlimited  "  legal  tender,"  and  the  coinage  of 
$2,000,000  to  $4,000,000  of  these  per  month,  and 
in  1887  these  were  made  exchangeable  for  the 
"trade  dollar."  The  "  Sherman  Act"  of  1890 
provided  for  the  purchase  at  market  price  of 
4,500,000  ounces  of  silver  each  month,  of  which 
2,000,000  ounces,  or  enough  to  provide  for  the  re- 
demption of  "  silver  certificates,"  should  be  coined 
monthly,  the  profit  or  seigniorage  going  into  the 
Treasury.  This  act  was  repealed  in  1893,  to  stem 
the  panic  of  that  year. 

This  panic  was  caused  by  the  fear  that  the  sil- 
ver dollar,  worth  as  metal  only  51  cents,  might 
become  the  money  of  account.  People  drew  gold 
from  the  Treasury  by  presenting  paper  currency 
until  the  Sub-Treasury  at  New  York  was  "  within 
twenty-four  hours"  of  suspending  gold  payments. 
The  President  averted  disaster  by  using  his  power 
to  sell  bonds  for  gold. 


UNITED  STATES  MONEY.  93 

The  Government  declares  what  money  shall  be 
"legal-tender"  among  its  citizens,  that  is,  what 
kind  of  money  when  te?idercd  by  a  debtor  shall 
make  a  legal  offer  to  discharge  a  debt.  If  you 
offer  to  pay  rent  in  any  other  kind  of  money  than 
legal-tender,  the  landlord  can  refuse  to  accept  it, 
and  can  get  a  court  to  put  you  out  as  though  you 
had  refused  to  pay.  The  gold  coins  of  the  United 
States  and  the  "standard  silver  dollar"  are  legal- 
tender  for  all  sums ;  the  small  silver  for  sums  not 
exceeding  ten  dollars;  and  the  nickels  or  the  old 
copper  cents  for  sums  not  exceeding  twenty-five 
cents  in  any  one  payment.  The  small  silver  and 
nickels,  issued  for  "change,"  make  no  pretence 
to  full  value,  and  are  a  "  token  money,"  to  be  re- 
deemed by  the  Government.  They  are  purposely 
under-weighted,  so  that  they  shall  not  be  melted 
down  or  carried  out  of  the  country. 

The  word  legal -tender  is  commonly  used  to 
signify  the  "United  States  notes"  or  ''green- 
backs," issued  under  the  acts  of  February  25, 
1862,  and  March  3,  1863,  which  say  on  the  back: 
"This  note  is  a  legal-tender  at  its  face  value  for 
all  debts,  public  and  private,  except  duties  on  im- 
ports and  interest  on  the  public  debt,"  both  of 


94  ECONOMICS  FOR  THE  PEOPLE. 

which  are  payable  in  metal -money.  The  law 
signed  by  President  Lincoln,  February  25,  1862, 
was  the  first  making  anything  but  gold  and  silver 
coin  a  legal  discharge  of  debts,  although  the  Con- 
tinental  Congress,  January  4,  1777,  passed  a  resolu- 
tion asking  the  States  to  declare  its  bills-of-credit 
legal-tender,  which  was  done  by  eight  States.  The 
law  of  1862  was  passed  as  a  "  war  measure,"  and 
included  "  all  debts  within  the  United  States."  In 
December,  1869,  the  United  States  Supreme  Court 
declared  that  the  legal-tender  clause  was  " ^neces- 
sary and  zV^proper,"  that  its  application  to  pre-ex- 
isting debts  impaired  the  obligation  of  contracts, 
and  that  the  law  was  therefore  unconstitutional. 
In  1870  two  vacancies  on  the  bench  were  filled  by 
President  Grant ;  on  a  new  case  a  rehearing  was 
had,  and  in  January,  1872,  the  decision  was  over- 
ruled, and  it  was  held  that  "  Congress  has  power 
to  enact  that  the  Government's  promises  to  pay 
money  shall  be,  for  the  time  being,  equivalent  in 
value  to  the  representation  of  value  determined 
by  the  coinage  acts."  "  There  are  times,"  added 
Justice  Bradley,  "  when  the  exigencies  of  the  State 
rightly  absorb  all  subordinate  considerations." 
This  decision  justified  the  issue  of  legal- tenders 
as  a  war  measure ;  but  a  third  decision,  in  March, 


UNITED  STATES  MONEY.  95 

1884,  went  further,  and  declared,  only  one  judge 
dissenting,  that  Congress  has  full  power  at  any 
time  to  authorize  the  issue  of  legal-tender  notes, 
on  the  ground  that  this  is  an  attribute  of  sover- 
eignty not  reserved  or  denied  by  the  Constitu- 
tion. The  decision  is  regarded  by  most  econo- 
mists as  dangerous,  and  it  is  believed  that  even 
the  war  could  have  been  carried  on  at  less  final 
cost  if  other  financial  measures  had  been  used. 

Of  course,  in  making  metal-money  it  costs  some- 
thing to  test  the  metal  and  stamp  it  into  coins. 
This  cost  may  be  paid  for  as  a  general  expense  of 
Government  out  of  taxes,  and  the  full  weight,  or 
face -value,  of  metal  put  into  the  coin.  This  is 
"  gratuitous  coinage,"  and  is  the  English  practice. 
Some  economists  object  that  it  leads  jewellers  to 
melt  up  new  coins  instead  of  assaying  for  them- 
selves, and  makes  the  Government  pay  for  a  "  per- 
petual motion"  of  coinage.  Or,  this  cost  may  be 
paid  by  deducting  enough  metal  before  making 
the  coin.  This  deduction  is  "seigniorage,"  the 
pay  of  the  seignior  or  sovereign.  Up  to  1853  the 
United  States  had  gratuitous  coinage,  but  in  that 
year  a  seigniorage  of  one-half  of  one  per  cent,  was 
established  for  gold  coins  and  silver  dollars,  re- 
duced in  1873  to  one-fifth.    Since  1875,  gold  coin- 


96  ECONOMICS  FOR  THE  PEOPLE. 

age  has  been  gratuitous.  Both  England  and  the 
United  States  now  have  "free  coinage"  for  gold; 
that  is,  any  citizen  can  have  gold  bullion  (uncoined 
metal)  made  into  coin  by  the  mint  on  the  same 
terms  as  the  Government.  The  coinage  of  stand- 
ard silver  dollars  is  now  determined  in  the  United 
States  by  the  redemption  of  "  silver  certificates," 
and  is  practically  discontinued  because  of  the  great 
number  in  the  Treasury  vaults.  The  amount  of 
"  change  "  coined  depends  upon  the  public  need, 
as  determined  here  by  the  Treasury,  in  England 
by  the  Bank  of  England. 

The  trouble  with  seigniorage  is,  that  it  makes 
it  easier  for  a  government  to  debase  its  own  coins, 
either  by  putting  in  less  metal  or  by  mixing  in  a 
cheaper  metal.  Up  to  1 300  (Edward  I.)  a  "  pound  " 
really  meant  a  pound's  weight  of  silver,  and  a  shil- 
ling a  twentieth  of  that.  But  the  coinage  was 
again  and  again  reduced  in  weight,  so  that  for 
generations,  it  is  now  supposed,  the  English  peo- 
ple actually  weighed  out  their  coins  in  settling 
payments.  The  steadiness  of  prices  in  face  of  a 
known  debasement  of  coinage  cannot  otherwise 
be  explained.  Sixty-six  shillings  now  make  up  a 
pound  of  silver,  so  that  the  pound  sterling  is  but 
three-tenths  of  a  pound's  weight  of  silver.  Sev- 


UNITED  STATES  MONEY.  97 

eral  English  monarchs,  notably  Henry  VIII.,  also 
debased  their  coinage  secretly  by  alloy.  One  of 
the  Spanish  gold  coins,  a  maravedi,was  debased  in 
quality  till  it  became  only  copper.  People,  how- 
ever, may  go  on  taking  this  debased  money  and 
calling  it  by  the  old  name  for  a  long  time,  and  one 
of  the  great  economists,  Ricardo,  sets  it  down  as  a 
law  of  seigniorage  that  a  debasement  of  coins  does 
not  of  itself  produce  depreciation  of  currency,  so 
long  as  no  more  is  issued  than  the  people  really 
need  in  their  exchanges.  This  is  true  so  long  as 
people  arc  willing  to  take  the  poor  money  as  good, 
either  because  they  cannot  get  better,  or  because 
they  do  not  know  better,  or  because  of  habit,  or 
because  the  law  tells  them  to.  But  when  they 
begin  to  get  afraid  of  the  debased  money,  and 
prices  start  up,  so  that  a  dollar  in  wages  does  not 
buy  in  the  cheap  money  what  it  did,  and  they  take 
to  barter,  or  modify  or  limit  their  production,  then 
come  "bad  times."  The  people  who  earn  wages, 
and  the  small  shopkeepers,  feel  the  effect  worst. 
This  happened  in  1883,  when  our  "  trade-dollar " 
stopped  circulating;  the  poor  people  and  country 
stores  could  buy  only  85  cents*  worth  with  the 
dollar  they  had  taken  for  a  hundred  cents. 

7 


PAPER  AS  MONEY. 

EVEN  the  precious  metals  weigh  a  good  deal, 
and,  in  large  amounts,  are  inconvenient  to  carry 
or  to  keep.  If,  therefore,  a  government,  or  a  bank, 
or  a. trustworthy  person,  will  keep  the  coin  for  the 
owner,  and  give  him  paper  certificates  that  it  is 
held  by  them,  he  likes  these  better,  though  they 
are  only  pieces  of  paper,  worth  nothing  in  them- 
selves. They  are  like  the  title-deeds  of  a  house. 
The  "  gold  certificates '  and  "  silver  certificates  " 
of  the  United  States  are  of  this  sort.  Such  paper 
is  "  representative  money"  in  the  strictest  sense, 
since  each  "  dollar"  represents  an  actual  dollar  in 
metal -money,  and  it  is  "  convertible  "  at  any  mo- 
ment into  metal-money.  The  metal  remains  un- 
used, while  the  paper  passes  current  from  hand  to 
hand  in  its  place,  as  currency. 

Now,  a  banker  finds  that  this  unused  money  is 


PAPER  AS  MONEY.  99 

not  called  for  by  its  real  owners  all  at  the  same 
time.  If  they  permit  him  to  use  or  loan  part  of 
the  metal,  he  can  make  a  profit  for  them  or  for 
himself  or  for  both  by  getting  interest  for  it,  keep- 
ing enough  "  reserve  99  of  metal  to  pay  the  demands 
presented  each  day.  The  Bank  of  Sweden,  found- 
ed in  1657,  early  issued  "  bank  money,"  or  notes 
undertaking  to  pay  to  the  bearer  at  sight  a  certain 
amount  of  metal-money.  So  long  as  such  money 
can  actually  be  had  on  demand  for  the  paper,  this 
kind  of  paper  currency  is  also  "convertible." 

If,  however,  the  bank  managers  make  a  mistake, 
and  do  not  keep  enough  reserve,  the  holders  of 
notes  may  become  frightened  and  make  a  "  run  " 
on  the  bank  to  get  their  part  of  the  metal  out  be- 
fore other  depositors  use  up  the  supply.  The 
bank  may  then  have  to  "  suspend  payment"  until 
it  can  "  realize  "  on  the  securities  it  has  taken  for 
loans,  that  is,  get  real  money  for  them.  If  enough 
people  are  scared  to  make  a  general  "  panic,"  it 
will  be  very  hard  to  get  the  real  money  even  by 
selling  the  securities  at  a  loss.  Thus  notes  which 
were  called  "  convertible  "  become  "  inconverti- 
ble," because  you  cannot  on  demand  convert 
them  into  the  metal -money  for  which  they  are 


IOO  ECONOMICS  FOR  THE  PEOPLE. 

supposed  to  stand.  Their  power-in-exchange,  or 
value,  will  be  no  longer  "as  good  as  gold,"  but 
will  depend  on  the  confidence  people  have  in  the 
ability  of  the  issuer  to  pay  by-and-by. 

During  the  war  our  Government,  not  having 
enough  money  for  its  needs,  said  to  the  soldiers 
and  the  shopkeepers:  "We  cannot  pay  you  mon- 
ey now,  but  we  will  some  time :  meanwhile  these 
pieces  of  paper  are  evidences  of  debt,  which  other 
citizens  must  accept  from  you  as  money."  These 
were  the  "  legal-tenders,"  a  paper  currency  incon- 
vertible at  the  time  of  its  issue,  but  which  became 
convertible  when  the  United  States  "  resumed  " 
specie  payment,  January  I,  1879.  ^  was  a  mort- 
gage on  the  earnings  of  the  people,  to  be  collected 
by  future  taxes.  Other  governments,  when  hard 
up,  have  done  the  same  thing,  but  usually  their 
currency  has  not  been  made  good.  The  assignats 
of  the  French  revolution  assigned  to  the  holders 
the  lands  seized  by  the  State,  but  few  holders  got 
the  lands  or  saw  their  money  again  ;  our  Conti- 
nental currency  in  like  manner  became  worth 
nothing.  Inconvertible  currency  of  this  sort  is 
not  representative  of  wealth,  but  evidence  of  debt: 
it  is  promises-to-pay,  or  credit-money.    A  govern- 


PAPER  AS  MONEY.  IOI 

mcnt  may  use  its  authority  to  force  a  loan  and 
give  such  currency  compulsory  circulation,  but  its 
power-in-exchangc,  like  that  of  inconvertible  bank 
money,  depends  at  once  on  the  confidence  in  its 
being  made  good.  In  the  dark  days  of  the  war 
greenback  dollars  bought  less  than  forty  cents  gold 
would  buy;  and  when  the  Government  tried  to 
prevent  their  further  fall  by  prohibiting  dealings 
in  gold,  people  only  lost  confidence  all  the  more, 
and  greenbacks  bought  still  less. 

The  economist  Ricardo  points  out  that  govern- 
ment inconvertible  currency  is  like  a  coinage  de- 
based its  entire  value,  for  the  cost  of  printing  is 
almost  nothing.  According  to  his  "  law  of  seign- 
iorage, "  such  a  debased  currency  does  not  necessa- 
rily depreciate,  or  buy  less  than  its  face-value,  if 
no  more  of  it  is  put  in  circulation  than  the  public 
needs.  But  usually  people  become  afraid  that  it 
is  not  worth  its  face-value  ;  it  falls — i.e.,  buys  less; 
more  is  needed  to  make  the  same  amount  of  pur- 
chases;  and  thus  depreciation,  inflation  of  prices, 
speculation,  and  all  their  train  of  ills  set  in.  There 
have  been  very  few  cases  where  an  inconvertible 
currency  has  kept  at  par  (of  equal  value)  with  gold. 
The  Bank  of  England  notes  from  1797  to  1808 


102  ECONOMICS  FOR  THE  PEOPLE. 

(after  which  date  they  fell),  and  those  of  the  Bank 
of  France  in  1848  and  after  1871,  are  almost  the 
only  instances. 

We  cannot,  in  short,  speak  of  "  paper  -money " 
as  though  it  were  all  of  one  kind  or  one  quality — 
all  good  or  all  bad.  We  must  discriminate,  as  we 
would  between  a  2.40  trotter  and  a  tread-mill  sack- 
of-bones,  though  each  is  called  a  horse.  Econo- 
mists dispute  fiercely  as  to  whether  paper  can  or 
cannot  be  "  money,"  but  this  is  really  a  quarrel 
about  words.  "  Money  is  that  money  does,"  says 
one  economist.  Some  use  the  word  "  money  "  to 
cover  any  substitute,  others  only  for  the  metal  or 
other  value-money  itself.  The  last  is  the  original 
meaning  and  does  not  mislead,  and  paper  is  more 
accurately  called  substitute -money  or  currency. 
As  a  common  medium  of  exchange,  paper  is  more 
convenient  than  metal ;  it  costs  less  to  print  it 
than  to  make  coins.  If  paper  is  worn,  or  lost,  or 
destroyed,  in  transit,  no  wealth  is  lost ;  without  it 
the  great  volume  of  modern  trade  could  scarcely 
have  developed,  and  the  lack  of  circulating  me- 
dium would  have  greatly  disturbed  prices.  It  has 
accordingly  been  used  for  many  centuries ;  Marco 
Polo  found  a  paper  currency  of  mulberry -bark 


PAPER  AS  MONEY.  103 

in  China  before  1300.  Adam  Smith  likens  it  to  a 
highway  in  the  air,  leaving  the  old  roads  for  crops. 
But  as  a  common  measure  of  value,  it  really  de- 
pends on  its  own  relations  to  metal-money,  and  as 
a  standard  of  deferred  payments  and  a  storcr  of 
values  it  may  prove  ruinously  treacherous.  When 
"greenbacks"  fell  to  40  per  cent.,  all  who  owed 
debts  gained,  though  only  till  they  had  to  borrow 
again  ;  when  they  rose,  all  who  owed  lost — in  nei- 
ther case  by  their  own  doings.  An  inconvertible 
paper  currency  is  usually  costly  in  the  long  run. 
We  honor  the  "  blood-stained  greenback  "  for  its 
help  in  the  war;  but  if  our  financiers  could  have 
avoided  paper  currency — as  Napoleon,  after  the 
paper  collapse  of  France,  did  throughout  his  great 
wars — we  might  have  been  saved  the  enormous 
loss  of  paying  out  at  forty  cents  and  redeeming  at 
a  hundred.  Steadfastness  is  the  great  safeguard 
of  sober  industry,  and  paper  currency  has  been 
called  "  the  alcohol  of  commerce"  and  "  mock 
money."  "  In  the  land  of  Mendacity,"  says  an 
Italian  writer,  "they  use  only  paper-money." 

Paper  currency  lacks  also  the  final  quality  of 
real  money — universality — for  it  is  "  good  "  only 
within  the  bounds  of  the  credit  of  the  country 


104  ECONOMICS  FOR  THE  PEOPLE. 

which  issues  it.  Metal-money  helps  trade  to  reg- 
ulate itself.  If  sugar  is  cheap  in  the  West  Indies, 
i.e.,  money  dear,  or  if  a  great  wheat  crop  has 
brought  us  an  excess  of  metal  (which  the  United 
States  produces  and  usually  exports),  L  e.,  money 
is  cheap,  money  flows  from  us  to  the  West  Indies 
and  we  get  our  sugar  cheap.  But  if  we  have  a 
debased  money,  the  natural  course  of  trade  is 
checked  and  we  lose  the  profit. 

Also,  when  full-value  and  debased  currency  are 
circulating  together  with  the  same  purchasing 
power,  "bad  money,"  as  stated  by  what  is  called 
Gresham's  law,  "  always  drives  out  good  money," 
which  people  hoard  or  send  away  where  they  can- 
not use  the  bad  money.  When  bad  money  thus 
checks  exchange  with  other  countries,  it  acts  at 
home  to  check  production,  raise  prices,  produce 
inflation,  and  wreak  ruin.  It  shuts  out  a  country 
from  the  benefit  of  the  world's  trade,  and  makes 
buyers  fewer.  Thus  "  cheap  money "  is  dear  in 
the  end. 

There  could  not  be  a  greater  misfortune  to 
every  honest  worker— farmer,  shopkeeper,  or  me- 
chanic— in  the  United  States,  than  the  issue  of  so- 
called  " fiat  money"  (Latin,  fiat,  let  it  be  created) 


PAPER  AS  MONEY,  105 

as  a  means  of  creating  wealth.  You  cannot  make 
nothing  good  for  something  by  printing  on  paper 
"good  for  one  dollar,  on  the  credit  of  the  United 
States,"  without  the  intention  of  ever  paying  the 
dollar.  This  would  not  be  credit  money,  because 
credit  means  belief  in  final  payment.  It  would 
have  no  "  labor-  value/'  nor  any  value,  because  it 
would  neither  cost  labor,  nor  represent  labor  stored 
as  wealth,  nor  be  a  promise  to  pay  labor.  The 
Government  could  circulate  it  only  by  paying  it 
out  for  work,  or  for  existing  debts,  or  by  loaning 
it,  or  by  giving  it  away.  If  it  were  given  away, 
either  everybody  could  get  it  alike,  so  that  no 
one  would  need  to  sell  real  things  for  it,  or  a  few 
in  the  ring  would  get  it  at  the  expense  of  the 
many.  If  it  were  loaned,  the  borrowers  would 
some  day  have  to  pay  back,  probably  with  a  more 
costly  currency  after  the  u  fiat  money  "  had  disap- 
peared from  sight,  so  that  a  mortgage  would  eat 
up  the  farm  or  the  house.  If  it  were  paid  out  for 
work,  that  is,  in  wages,  a  laborer  getting  three 
"  dollars  "  a  day  in  place  of  one  would  be  no  bet- 
ter off,  because  the  farmer  would  require  three 
dollars  instead  of  one  for  the  wheat  which  cost 
him  a  day's  work.    Prices  would  rise,  but  a  day's 


106  ECONOMICS  FOR  THE  PEOPLE. 

work  would  not  buy  more.  Dishonest  men  who 
owed  debts  would  gain  by  forcing  such  a  legal- 
tender  on  the  people  they  owed ;  but  new  deal- 
ings would  be  on  special  contracts  to  pay  in  real 
money,  as  in  the  time  when  greenbacks  were  low- 
est, for  no  law  can  make  a  man  sell  what  he  pre- 
fers to  keep.  As  times  grew  harder,  "  more  money  " 
would  be  the  cry,  as  the  drunkard  cries  for  more 
rum,  and  the  currency  would  be  worth  less  and 
less.  When  the  sham  came  to  its  end,  the  worth- 
less paper  would  be  not  in  the  bank  and  the  mer- 
chant's safe,  but  in  the  pocket  of  the  worker  and 
the  till  of  the  small  shopkeeper.  This  happened  in 
the  case  of  the  silver  trade-dollar  also,  and  a  like 
thing  would  happen  if  the  under -weight  silver 
dollar  drove  out  gold.  All  this  is  true  as  to  all 
"  cheap  money,"  that  is,  money  in  which  the  coins 
have  not  full  value  or  full  weight  in  fine  metal. 
"  Repudiation  "  is  the  most  foolish  crime  of  states, 
for  it  prevents  all  credit :  " fiat  money  "  is  a  repu- 
diation in  advance.  "  A  disordered  currency," 
said  Daniel  Webster,  is  "  the  most  effectual  of  in- 
ventions to  fertilize  the  rich  man's  fields  by  the 
sweat  of  the  poor  man's  brow." 


XV. 


BANKS  AND  BANKING. 

THE  little  rills  up  on  the  hill-sides  do  not  count 
for  much,  but  when  they  fill  the  mill-pond  the 
farmer  can  grind  his  grist  and  the  woodman  can 
saw  his  logs  by  their  help.  A  bank  is  just  such 
a  reservoir  of  money  stored  for  use.  The  depos- 
itors add  their  dollars  to  the  capital  of  the  stock- 
holders, and  this  money  is  then  let  out  when  and 
where  it  is  needed  for  business.  These  loans  are 
often  made  to  governments,  either  directly  or  by 
buying  Government  issues.  This  was,  in  fact,  the 
purpose  of  the  first  public  bariks,  started  in  Italy 
probably  before  1200.  The  Greeks  had  their  tra- 
pczites  or  bankers,  so  called  from  the  table  (trapeza) 
on  which  they  counted  out  the  money ;  and  when 
banking  was  revived  by  the  Jewish  money-lenders 
of  Italy  in  the  Middle  Ages,  each  had  his  banca,  or 
bench,  which  was  broken  {rotta  or  ruptd)  when  he 


108  ECONOMICS  FOR  THE  PEOPLE. 

failed  to  pay  as  he  promised,  so  he  was  said  to  be- 
come bankrupt. 

Besides  loaning  to  governments  or  to  corpo- 
rations— that  is,  buying  their  "  bonds  "  or  "  securi- 
ties " — banks  loan  their  money  to  private  persons, 
such  as  merchants,  whose  promises-to-pay  are  called 
notes- of- hand  or  mercantile  paper.  The  use  of 
money  is  paid  for  by  adding  an  extra  sum  called 
interest  at  the  end  of  the  time,  say  $106  for  $100 
at  the  end  of  a  year,  or  by  deducting  a  like  sum  as 
discount,  the  borrower  receiving  but  $94  instead  of 
the  $100  he  promises  to  pay  a  year  hence.  If  mon- 
ey is  scarce  or  times  risky,  or  the  man  doubtful, 
so  that  his  credit  (the  belief  in  him)  is  poor,  he  will 
have  to  pay  greater  interest  or  discount ;  if  the 
money  market  is  "  easy,"  less.  The  bank  may  trust 
him  simply  on  his  note,  or  he  may  give  it  collater- 
al— that  is,  securities  along-side  with  his  own  prom- 
ise. This  loaning  is  the  first  way  in  which  a  bank 
does  service  and  makes  profit. 

A  bank  usually  permits  its  depositors  to  draw 
on  it  orders  to  pay  money,  called  checks,  a  word 
which  comes  from  Exchequer,  the  name  given  to 
the  British  Treasury  because  it  formerly  used  a 
checkered  table  like  a  chess-board  for  convenience 


BANKS  AND  BANKING.  IO9 

in  counting.  This  enables  men  to  pay  debts  with- 
out carrying  about  money.  The  great  "  clearing- 
houses M  in  New  York  and  London  do  this  service 
for  the  banks  themselves,  clearing  up  at  the  close 
of  each  day  transactions  of  millions  by  receiving 
orders  on  banks  which  owe  from  banks  which  arc 
owed,  and  transferring  any  small  balance  from  a 
debtor  bank  to  a  creditor  bank.  This  cancelling 
of  indebtedness  is  a  second  service  of  banking. 

A  bank  also,  by  the  help  of  banks  in  other 
places,  collects  distant  debts.  A  creditor — that  is, 
some  one  to  whom  money  is  owed — "  draws  "  upon 
the  debtor  who  owes  him  ;  the  draft,  or  order-to- 
pay,  is  sent  by  a  bank  in  New  York  to  its  corre- 
spondent bank  in  Chicago,  which  sends  out  a  run- 
ner to  collect  it  from  the  Chicago  debtor.  Or  it 
maybe  the  debtor's  own  note  which  is  sent  on  for 
collection.  If  he  does  not  pay,  the  bank  protests, 
and  returns  the  draft  or  note  with  an  affidavit 
called  a  protest.  When  drafts  are  drawn  upon  peo- 
ple in  other  countries  they  are  called  "  foreign  ex- 
change." The  bank  sells  to  a  man  in  New  York 
the  right  to  receive  or  transfer  in  London,  for  in- 
stance, money  due  by  some  other  Englishman  to 
some  other  American.    This  saves  the  risk  and 


110  ECONOMICS  FOR  THE  PEOPLE.  . 

cost  of  sending  specie,  i.e.,  gold  or  silver  money 
or  bullion ;  and  the  charge  for  this  service — that 
is,  the  rate  of  exchange — varies,* within  the  limits 
of  the  cost  of  shipping  specie  as  freight,  according 
to  whether  more  or  less  money  is  due  in  London 
than  there  are  debts  to  be  paid  there.  It  costs  a 
little  over  half  a  cent  to  get  a  gold  dollar  safely  to 
London  ;  the  value  of  the  English  pound,  in  which 
London  settlements  are  made,  is  reckoned  by  our 
mint  at  $4.86T6^-;  the  rate-of-exchange  brings  a 
bill -of- exchange  perhaps  to  $4.90,  above  which 
point  it  pays  better  to  ship  gold.  This  collection 
of  debts  is  a  third  service  of  banking. 

A  bank  dealing  in  money  knows  how  much  for- 
eign or  debased  coins  are  really  worth,  and  buys 
them  for  that  much  current  money.  Where  there 
is  mixed  money  this  is  very  important :  it  was 
the  origin  of  the  great  Bank  of  Amsterdam  and 
of  much  of  the  mediaeval  Jewish  banking.  This 
is  a  fourth  service. 

A  bank  is  also  a  place  of  safe  deposit  for  valu- 
ables, and  English  banking  grew  out  of  the  busi- 
ness of  the  goldsmiths,  who  took  valuables  for 
safe-keeping,  and  got  in  the  habit  of  advancing 
money  on  them.     Many  of  the  Crusaders  thus 


BANKS  AND  BANKING.  1 1 1 

borrowed  money  of  the  Jews.  This  is  a  fifth  serv- 
ice of  banking,  though  now  "  safe  deposit  compa- 
nies "  have  taken  much  of  this  business. 

Here,  then,  are  five  kinds  of  service  which  a  bank 
performs,  and  for  which  it  rightly  earns  money, 
without  touching  what  most  people  think  is  the 
chief  work  of  a  bank,  the  issue  of  paper- money. 
The  earliest  "  bank  of  issue  M  was  probably  that  of 
Sweden,  founded  in  1657.  Like  each  of  the  other 
five  named,  this  service  may  or  may  not  be  a  feat- 
ure of  a  true  bank  :  the  "  issue  department  "  and 
the  "  banking  department  "  of  the  great  Bank  of 
England  are  virtually  two  separate  banks,  doing 
different  things.  The  issue  of  paper-money,  if  wise- 
ly done,  is  a  sixth  service,  but  it  includes  the  great- 
est danger  of  the  banking  business.  In  England 
only  the  Bank  of  England,  which  is  the  financial 
representative  of  the  Government,  can  issue  bank- 
notes, and,  above  £15,750,000  represented  by  se- 
curities (of  which  the  £11,000,000  owed  by  the 
Government  to  the  bank  is  the  greater  part),  it 
must  keep  a  pound  in  gold  in  its  vaults  for  each 
pound-note  issued.  This  is  the  result  of  Sir  Rob- 
ert Peel's  famous  Bank  Act  of  1844,  in  which  the 
advocates  of  the  "  banking  principle  "  upheld  by 


112  ECONOMICS  FOR  THE  PEOPLE. 

Thomas  Tooke,  who  argued  that  so  long  as  you 
can  actually  get  gold  for  your  bank-note  there  is 
no  need  of  limiting  issues  by  law,  were  defeated 
by  those  who  held  to  the  "  currency  principle,'* 
led  by  Lord  Overstone,  who  argued  that  without 
such  limitation  currency  is  almost  sure  to  be  over- 
issued and  so  inflate  prices  by  its  depreciation. 
Our  "  National  currency,"  issued  by  the  National 
Banks,  is  protected  by  a  deposit  with  the  United 
States  Treasury  of  Government  bonds,  against 
which  only  ninety  per  cent,  of  their  face-value  can 
be  issued  in  currency,  and  by  the  Government  guar- 
antee of  receiving  it  for  all  dues  except  interest  on 
the  public  debt.  These  banks  also  keep  a  gold  re- 
serve, usually  about  12  per  cent,  of  their  notes. 

The  one  purpose  of  all  these  branches  of  the 
banking  business  is  to  make  the  most  of  the  ex- 
isting stock  of  capital.  Safely  done,  this  helps 
everybody.  Careless  banking,  on  the  contrary, 
cripples  all  business.  The  need  of  banks  wherev- 
er people  do  business  is  shown  by  the  fact  that 
when  a  little  place  starts  up  in  the  West,  the  keep- 
er of  the  country  store  becomes  virtually  banker 
for  the  place  until  a  public  bank  is  started.  The 
"  wild-cat "  banks  before  the  war  at  the  West,  nev- 
ertheless, did  a  great  deal  of  harm  :  they  issued 


BANKS  AND  BANKING.  1 1 3 

great  quantities  of  paper-money,  kept  as  little  as 
two  per  cent,  of  specie,  and  failed  to  pay  their 
notes.  The  country  was  cursed  with  paper-money, 
much  counterfeited,  from  hundreds  of  banks  of  all 
shades  of  credit,  which  no  one  would  take  until  he 
could  look  up  the  facts  in  the  Bank-note  Detector \ 
issued  monthly  in  those  days.  This  system  of 
banks  chartered  by  the  States  was  largely  super- 
seded, early  in  the  war,  by  the  system  of  National 
Banks,  under  acts  of  February  25,  1863,  and  June 
3,  1864.  The  greatest  amount  of  notes  authorized 
was  $354,000,000,  which  was  never  quite  reached. 
These  notes  were  covered  by  the  deposit  of  Unit- 
ed States  bonds,  and  gave  a  safe  and  convenient 
currency,  similar  to  the  "  greenbacks."  The  prof- 
it of  interest  and  on  lost  notes,  as  in  the  case  of 
State-bank  notes,  is  made  by  the  banks,  and  not, 
as  in  the  case  of"  greenbacks,"  by  the  Government ; 
but  this  is  perhaps  compensated  for  by  the  service 
done  by  the  banks,  and  the  regulation  of  the  cur- 
rency by  the  needs  of  business  instead  of  by  arbi- 
trary law.  The  present  problem  of  banking  is 
what  securities  can  be  used  as  a  basis  of  National- 
bank  notes,  as  the  Government  pays  its  debt  and 
withdraws  its  bonds. 

8 


1 14         ECONOMICS  FOR  THE  PEOPLE. 

In  1895  there  were  3712  National  Banks,  with 
$657,000,000  capital,  $1,715,000,000  deposits,  and 
$182,000,000  circulation ;  there  were  also  reported 
1017  savings-banks,  with  $1,844,500,000  deposits; 
and  5086  State  and  private  banks  and  trust  com- 
panies, with  $392,500,000  capital,  and  $1,340,800,- 
000  deposits — these  being  but  partial  returns  ;  so 
that  we  have  over  9800  banks,  with  probably 
$1,050,000,000  capital,  and  nearly  $5,000,000,000 
deposits. 

Savings-banks  are  confined  usually  to  receiving 
deposits  in  small  sums,  and  pay  the  depositors,  in  in- 
terest and  dividends,  the  whole  profit  from  the  loan- 
ing of  this  money.  They  are  governed  by  trustees 
representing  the  depositors,  only  a  few  having  separ- 
ate capital  and  stockholders,  and  they  are  restricted 
by  law  from  loaning  except  on  specified  security.  In 
England  the  Post-ofifice  Department  is  a  great  sav- 
ings-bank, receiving  savings  in  postage-stamps  or 
money  at  each  post-ofifice,  and  loaning  the  total  to 
Government  by  investing  it  in  Government  bonds. 

Banks,  we  have  seen,  are  really  stores  which  deal 
in  money,  collecting  it  and  letting  it  out  much  as 
a  grocer  buys  and  sells  groceries.  They  give  credit 
for  money  just  as  a  grocer  would  give  credit  for 


BANKS  AND  BANKING.  U5 

goods.  But  because  money  is  the  general  medium 
of  exchange,  and  banks  are  usually  public  institu- 
tions, the  bank  reports,  showing  the  " reserve"  held 
by  them,  show  the  commercial  condition  of  the 
community  much  as  a  steam-gauge  shows  the  pres- 
sure in  a  steam-engine.  When  money  is  " scarce" 
and  much  wanted,  or  when  times  are  risky,  bank- 
ers charge  a  greater  rate  of  interest  or  discount ; 
and  as  London  is  the  great  banking  centre,  the 
rate  made  from  week  to  week  by  the  governors  of 
the  Bank  of  England,  usually  varying  between  3 
and  4  per  cent.,  is  an  indication  of  the  state  of 
trade  in  the  whole  world.  Bankers  need  to  be 
very  wise  in  these  matters,  else  the  community 
may  be  tempted  into  over-speculation  by  too  free 
loans  or  frightened  into  panics  by  over- caution. 
Thus  the  usefulness  of  any  bank,  and  of  the  whole 
banking  system,  depends  upon  the  honesty  and 
good  judgment  of  the  men  conducting  it.  No 
law  can  prevent  foolish  people  from  putting  mon- 
ey into  swindles  which  call  themselves  "  banks  " 
or  "  bankers,"  and  such  people  must  pay  the  pen- 
alty in  loss.  But  a  system  of  sound  branch  banks 
throughout  the  country,  like  that  in  Scotland,  is  a 
great  boon  to  a  people. 


XVI. 


LAND  AND  ITS  FEATURES. 

When  a  farmer  gets  what  he  calls  a  fair  price 
for  a  bushel  of  potatoes,  say  40  cents,  he  finds, 
when  he  thinks  it  out,  that  he  has  paid  or  has  to 
pay  say  5  cents  for  the  use  of  the  land  on  which 
the  crop  was  grown;  15  cents  for  seed,  fertilizers, 
and  replacing  his  tools;  15  cents  for  labor  in 
planting,  hoeing,  and  digging ;  and  has  left  5  cents 
"  profit,"  wrhich  is  his  own  pay  for  his  skill  in  man- 
aging the  crop  and  taking  the  risks  of  it.  Or  a 
cotton-mill  corporation  which  gets  7  cents  a  yard 
for  its  sheetings  finds  that  the  use  of  land  and  wa- 
ter-power has  cost  it  -J-  cent  a  yard  ;  the  use  of  its 
mill  and  machinery  and  the  cotton  it  uses,  all  of 
which  are  expenditures  of  capital,  5  cents ;  wages, 
i-J  cents;  leaving  for  cost  of  administration  and 
net  profits  f  of  a  cent. 

"  Unto  each,  its  own."  By  means  of  Exchange, 
with  money  for  its  chief  instrument,  the  result  of 


LAND  AJVZ)  ITS  FEATURES.  \\J 

Production  becomes  the  subject  of  Distribution, 
and  each  factor  which  retributes  to  the  product 
is  entitled  to  its  share  when  that  product,  or  its 
returns  in  money,  is  attributed.  Having  now 
learned  the  meaning  of  value  and  price,  the  nat- 
ure of  money,  and  the  functions  of  banking,  we 
come  to  the  consideration  of  the  several  factors  in 
Production  and  their  payment  in  the  Distribution 
of  product.  The  principal  factors  are  Land,  Cap- 
ital, Labor,  Brains,  contributed  by  the  Land-own- 
er, the  Capitalist,  or  wealth -owner,  the  Laborer, 
or  hand -worker,  the  Director  of  production,  or 
brain  -  worker,  who  are  paid  by  Rent,  Interest, 
Wages,  Profits.  Any  or  all  of  these  may  be  com- 
bined :  a  farmer  who  owns  his  farm,  who  does  not 
have  to  borrow  capital  for  seed  and  tools,  and  who 
does  his  own  work,  does  not  have  to  pay  out  to 
anybody  else  any  part  of  his  40  cents,  except  for 
taxes  and  insurance;  but  all  the  same  the  crop 
must  pay  him  rent,  interest,  wages,  as  well  as  prof- 
its, or  his  farming  "does  not  pay."  Taxes,  in- 
surance, and  the  like,  we  shall  see  later  on,  are 
an  indirect  payment  for  the  factors  in  production 
above  noted. 

The  one  great  exception  to  the  general  truth 


Il8  ECONOMICS  FOR  THE  PEOPLE. 

that  all  wealth  comes  from  work  is  Land,  the  use 
of  which  is  paid  for  by  Rent — that  is,  the  amount 
rendered  by  the  user  to  the  owner.  For  capital 
is  but  stored  labor,  and  the  Director  also  labors, 
though  with  his  brains  instead  of  his  hands.  Land 
is  the  contribution  of  nature,  valuable  in  exchange 
because  it  is  limited  in  quantity  and  various  in 
quality.  Air  every  man  may  have,  and  it  is  all 
alike ;  therefore  no  man  buys  it.  This  is  not  so 
with  land,  which,  in  the  economic  sense,  includes 
all  property  connected  with  the  earth,  as  water- 
power,  or  shooting  rights,  or  shore  rights,  or  the 
right  to  fish  in  privately  owned  waters ;  in  brief, 
anything  that  is  "  rented,"  not  of  human  origin. 
It  is  usual  to  speak  of  the  rent  of  a  house  or  a  fac- 
tory, but  economists  confine  the  word  to  that  part 
of  the  payment  which  is  for  the  land  itself,  the 
building  being  really  a  form  of  capital,  paid  for  by 
interest.  Rental  is  perhaps  a  better  word  for  rent 
and  the  payment  for  the  use  of  buildings.  Land 
and  the  fixtures  upon  it  are  often  spoken  of  as 
realty  or  real  property,  to  distinguish  them  from 
personalty  or  movable  property.  Land  is  the 
primal  source  of  all  product  extracted  by  labor0 
it  is  the  mother  of  wealth. 


LAND  AND  ITS  FEATURES.  119 

When  men  "  possessed  the  earth,"  and  "  the  land 
was  all  before  them  where  to  choose,"  they  found 
that  there  was  in  fact  a  choice,  for  some  land  was 
better  for  their  purpose  than  other  land.  The 
wandering  tribes  of  herdsmen  sought  the  best 
pasturage,  and  sometimes  fought  for  its  posses- 
sion. As  men  became  civilized  and  tillers  of  the 
soil,  they  settled,  whether  in  ancient  India  or  in 
ancient  Germany,  in  village  communities.  Each 
community  owned  its  tract  of  land,  marked  off 
into  three  marks — the  common  or  untitled  land, 
the  village  mark  where  each  family  had  its  house, 
and  the  arable  mark,  usually  divided  into  three 
great  strips  or  fields  (one  for  a  heavy  crop,  one  for 
a  light  crop,  one  lying  fallow,  in  rotation).  Of 
these  three  fields  each  family  had  a  portion,  which 
seems  to  have  been  redistributed  at  intervals  of 
years.  The  community  was  the  general  owner, 
but  it  allotted  particular  pieces  to  particular  fami- 
lies for  their  houses  permanently,  it  seems,  for 
their  tillage  subject  to  change.  The  Hebrew  pro- 
vision (Leviticus  xxv.  8)  that  all  village  land  should 
be  returned  to  its  original  owners  in  the  fiftieth 
year  of  jubilee,  but  that  city  house-land  could  be 
permanently  sold,  shows  traces  of  the  same  sys- 


120  ECONOMICS  FOR  THE  PEOPLE. 


tern,  but  it  does  not  seem  to  have  lasted  many 
generations  beyond  the  conquest  of  Canaan.  Un- 
der the  feudal  system,  which  fixed  men  on  the 
soil,  the  occupier  of  land  paid  a  tax  or  license  or 
military  service  to  the  feudal  owner,  and  competi- 
tive rent,  depending  on  the  productiveness  of  land, 
did  not  yet  exist. 

Later  on,  as  civilization  progressed,  land  came 
more  definitely  into  individual  ownership,  and  men 
sold  their  holdings  or  let  them  for  rent.  But  the 
community,  or,  as  chieftainship  developed,  the  lord 
of  the  manor,  always  held  a  superior  ownership, 
which  has  come  down  to  our  day  in  the  doctrine 
of  "  eminent  domain. "  In  Great  Britain  the  Queen, 
in  this  republic  the  sovereign  people,  is  supposed 
to  own  all  the  soil,  private  lands  as  well  as  public 
lands ;  and  it  is  by  virtue  of  this  that  the  State 
takes  or  grants  to  railroads  the  right  of  way  through 
private  lands,  on  payment  of  compensation  fixed 
by  a  court,  even  though  the  owner  does  not  want 
to  sell. 

The  law  and  custom  as  to  the  descent  of  land 
have  great  influence  on  the  economic  condition  of 
a  country.  In  France  the  Code  Napoleon,  requir- 
ing the  division  of  all  landed  property  (except  the 


LAND  AND  ITS  FEA  TURES.  1 2 1 

equivalent  of  one  child's  share)  equally  among  the 
children,  is  said  to  have  "  changed  the  face  of  the 
landscape;"  it  certainly  promoted  the  tendency  to 
small  holdings,  which  has  given  France  5,500,000 
farms,  5,000,000  of  them  under  one  hectare  (six 
acres)  each.  Entail — the  right  to  fix  the  owner- 
ship of  lands  through  successive  generations — is 
now  abolished  in  most  civilized  countries,  but  the 
practice  of  primogeniture,  or  descent  by  oldest  son 
when  no  will  is  left,  and  the  great  legal  costs  in 
conveying  land,  have  combined  to  keep  the  land 
of  Great  Britain  and  Ireland  in  few  hands.  Out 
of  72,000,000  acres,  not  common  or  waste  lands, 
with  a  rental  valuation  of  $650,000,000,  one  half 
(40,000,000  acres)  is  owned  by  2238  people;  41 
have  holdings  of  over  100,000  acres  each,  aggre- 
gating 9,000,000  acres,  10,888  holdings  of  over 
10,000  acres,  and  314,703  include  all  of  one  or  more 
acres.  In  this  country  land  is  plenty  and  transfer 
is  easy,  and  most  of  the  States  prohibit  devises 
beyond  21  years  from  the  death  of  heirs  living, 
and  divide  intestate  (unwilled)  property  equally 
among  children.  The  United  States,  accordingly, 
had,  in  1890,  4,564,641  farms,  comprising  623,218,- 
619  acres  and  averaging  137  acres  each,  of  which 


122         ECONOMICS  FOR  THE  PEOPLE. 

1,318,521  are  under  50  acres  and  31,546  over 
1000  acres.  The  individual  ownership  of  land,  and 
its  division  into  many  holdings  not  too  small  to 
pay,  has  usually  been  found  to  be  the  most  pro- 
ductive system,  though  the  introduction  of  ma- 
chinery on  a  huge  scale  on  the  great  farming 
plains  of  the  West  is  producing  new  results. 

Land  is  not  only  limited  in  quantity,  but  it  is 
limited  also  in  quality  or  power  of  production.  Its 
natural  productiveness  may  be  raised  by  careful 
tillage  and  use  of  fertilizers,  so  that  an  acre  which 
would  naturally  produce  only  8  bushels  of  pota- 
toes may  produce  12.  But  a  point  is  presently 
reached  where  it  costs  more  labor  to  raise  the  ex- 
tra bushel  of  potatoes  than  the  bushel  is  worth  ; 
at  this  point,  if  ten  men  have  been  working  on  a 
potato-field,  the  labor  of  an  eleventh  man  will  not 
get  one-tenth  more,  and  so  each  worker  averages 
less.  This  principle  is  known  as  "  the  law  of  di- 
minishing returns."  It  holds  also  in  machinery  to 
some  extent,  for  it  costs  more  coal  to  get  the 
twentieth  knot  of  speed  out  of  a  fast  steamship 
than  for  any  two  or  three  knots  at  less  speed,  but 
in  manufacture  more  machines  can  commonly  be 
made  until  there  are  enough  to  produce  all  that  is 


LAND  AND  ITS  FEATURES.  1 23 

wanted.  But  land  cannot  be  increased  in  quanti- 
ty, and  the  law  of  diminishing  returns  is  a  peculiar 
difficulty.  It  led  to  the  doctrine  of  Malthusian- 
ism,  named  from  the  English  economist  Malthus, 
which  points  out  that  population  tends  to  increase 
geometrically,  doubling  every  twenty- five  years, 
and  food  only  arithmetically,  so  that  the  race  faces 
starvation,  unless  population  is  checked.  But,  as 
a  matter  of  fact,  the  increase  of  food  product  has 
outrun  the  increase  of  population,  and  each  gen- 
eration since  Malthus's  day  has  had  more  to  cat 
than  that  before  it.  And  it  is  now  claimed  that 
by  treating  the  soil  as  a  laboratory  instead  of  as  a 
farm,  and  obtaining  the  free  nitrogen  of  the  air  by 
means  of  plants  such  as  Indian -corn,  we  can  in- 
crease the  supply  of  food  almost  indefinitely. 

Thus  far,  better  farming  has  increased  remarka- 
bly the  agricultural  product  per  acre.  England, 
in  the  fourteenth  century,  used  nearly  all  its  ara- 
ble land  to  support  2,500,000  people,  an  acre  pro- 
ducing only  8  bushels  of  wheat  from  2  bushels  of 
seed;  in  the  eighteenth,  7,500,000  were  support- 
ed more  comfortably,  the  product  being  20  bush- 
els;  less  land  is  now  cultivated,  but  the  product 
is  nearly  30  bushels.    France,  in  the  seventeenth 


124  ECONOMICS  FOR  THE  PEOPLE. 

and  eighteenth  centuries,  with  a  population  rising 
from  12,000,000  to  19,000,000,  obtained  only  9 
bushels  to  the  acre,  and  every  third  year  went  hun- 
gry ;  her  product,  with  double  the  population,  is 
now  15^  bushels,  which,  with  her  imports,  enables 
each  person  to  consume  more  than  21  instead  of 
less  than  14  bushels  per  year. 

While  the  original  value  of  land  is  a  boon  of 
nature,  a  piece  of  land  acquires  an  added  value  in 
two  ways ;  first,  through  its  direct  improvement 
by  cultivation,  so  that  it  becomes  in  this  sense  "  a 
manufactured  tool  "  improved  in  use — "  the  great 
savings-bank"  through  which  each  generation  be- 
queaths a  large  part  of  its  gains  to  the  next ; 
secondly,  through  its  indirect  advance  with  the 
progress  of  society  and  the  new  demands  as  "  the 
country  grows  up  to  it."  The  thin,  warm  soils 
near  watercourses  —  first  cultivated,  as  Henry  C. 
Carey  points  out,  by  new  settlers,  because  more 
accessible — are  made  more  and  more  productive 
by  the  use  of  fertilizers ;  the  richer  soil  of  swamps 
or  forests  must  be  drained  or  cleared  by  the  labor 
of  men  ;  in  our  Western  States  many  lands  de- 
pend on  artificial  irrigation  for  almost  their  whole 
productive  capacity.    All  these  are  examples  of 


LAND  AND  ITS  FEATURES.  12$ 

direct  improvement  by  the  individual  cultivator. 
Where  a  man  owns  his  farm,  this  work  is  so  much 
capital  put  into  his  land  instead  of  into  the  sav- 
ings-bank. It  may  thus  be  said  that  the  final  value 
of  a  piece  of  land  on  which  rent  is  to  be  paid  is 
made  up  of  three  elements,  contributed  by  (i)  nat- 
ure, (2)  society,  (3)  the  individual  improver. 

The  increase  in  the  value  of  a  piece  of  land 
caused  by  "  society,"  usually  called  the  "  unearned 
increment "  because  it  is  not  earned  by  the  holder 
of  the  land,  comes  partly  from  the  increased  de- 
mand for  product  as  a  community  develops,  partly 
from  the  safety  in  producing  which  grows  with 
law  and  order  under  good  government,  but  chiefly, 
in  the  case  of  agricultural  lands,  by  the  ease  of 
access  which,  in  bringing  a  market  near  to  a  piece 
of  land  by  means  of  good  roads  and  of  railways, 
practically  brings  the  land  to  the  market,  and  in- 
creases the  return  by  decreasing  the  cost  of  trans- 
portation. In  the  case  of  the  small  pieces  of  land 
productive  for  manufacturing  purposes,  and  in  the 
smaller  pieces  productive  as  stores  and  shops  for 
business  purposes,  the  value  added  by  society  be- 
comes greater  and  greater.  When  we  come  to 
city  lands  used  for  residences,  not  business  pur- 


126  ECONOMICS  FOR  THE  PEOPLE. 


poses,  the  natural  element  of  value  sinks  almost 
out  of  sight,  productiveness  is  not  considered,  and 
accessibility  and  fashion,  purely  social  or  mental 
elements,  are  the  chief  elements  of  value.  The 
city  of  Chicago,  where  500  acres  were  offered  in 
1841  for  $5300,  has  now  a  land  valuation  of  over 
$50,000,000,  mostly  from  "  unearned  increment/' 
Land  in  the  heart  of  London  is  said  to  have  in- 
creased a  thousandfold  in  value  in  150  years.  The 
amount  of  land  withdrawn  from  production  for 
residence  use  is  not,  in  this  country,  very  large ; 
the  11,483,318  dwelling-houses  (housing  5^  per- 
sons each,  being  12,690,152  families  averaging  5 
persons  each)  and  other  buildings  in  the  United 
States  would  occupy  about  600  square  miles,  or 
half  the  State  of  Rhode  Island,  and  the  auxiliary 
ground  would  probably  take  but  a  fraction  of 
Connecticut. 

It  has  been  pointed  out  by  Adam  Smith  and 
other  economists  that  the  general  price  of  land  is 
low  when  interest  is  high,  that  is,  when  capital  is 
scarce.  The  reason  is  that  productive  land  can 
be  fully  developed  only  by  the  help  of  capital; 
and  when  capital  is  not  easily  to  be  had,  either 
because  manufacture  is  diverting  it  from  agricult- 


LAND  AND  ITS  FEATURES.  1 27 

ure,  or  for  other  reasons,  the  land  cannot  be 
worked  to  full  advantage  and  has  for  the  time 
less  value. 

The  census  estimate  (1890)  of  the  total  property 
in  the  United  States  (§65,037,000,000)  assigns  $13,- 
279,000,000  to  farms,  of  which  four  fifths  is  sup- 
posed to  be  land-value  ;  §26,265,000,000  to  business, 
residence,  and  other  real  estate,  of  which  one-half 
to  two-thirds  is  land-value;  besides  $8,685,000,000 
to  railroads  and  equipment,  and  §1,291,000,000 
to  mines  and  quarries.  The  value  of  the  land,  as 
improved,  would  be  thus  near  §30,000,000,000,  or 
nearly  a  half  of  our  total  property.  It  is  asserted 
by  investigators  of  the  subject  that  "  universally 
the  market  value  of  the  aggregate  of  land  and 
that  of  the  aggregate  of  productive  capital  are 
equal." 

The  total  area  of  the  United  States,  omitting 
Alaska,  is  2,970,000  square  miles,  with  an  average 
of  21 1  persons  to  the  square  mile.  Of  this  about 
one  half,  1,500,000,  is  considered  arable  land  ; 
973,700  is  already  occupied  as  farms  (558,700  im- 
proved and  415,000  as  yet  unimproved).  Alaska, 
with  its  531,409  square  miles,  brings  the  total  area 
to  3,500,000  square  miles.    Of  this,  the  United 


128         ECONOMICS  FOR  THE  PEOPLE. 


States  has  held,  unallotted,  as  public  lands,  2,890,- 
000  square  miles,  or  1,850,000,000  acres,  of  which 
1,042,000,000  had  been  surveyed  by  June  30,  1895. 
This  cost  about  $322,000,000,  of  which  the  greater 
part  had  been  got  back  by  sales. 

About  313,000,000  acres  of  surveyed  land  re- 
mained unsold,  estimated  with  the  unsurveyed 
land,  excluding  Alaska,  to  be  worth  $1,000,000. 


XVII. 


OF  RENT,  AND  THE  POSSIBILITIES  OF  ITS 
ABOLITION. 

RENT  is  the  charge  paid  for  the  use  of  land. 
The  man  who  in  some  way  has  obtained  actual  or 
legal  possession  of  it  will  not  let  another  man  put 
his  labor  upon  it  to  make  its  potential  values  act- 
ual values,  by  raising  potatoes,  or  digging  gold,  or 
building  a  mill  alongside  the  stream  which  runs 
through  it,  without  paying  rent.  Now,  if  a  farmer 
wants  to  grow  potatoes,  and  there  are  two  acres 
of  land  to  rent,  one  of  which  will  grow  three  times 
as  many  potatoes  as  the  other  with  the  same  out- 
lay for  labor,  fertilizers,  etc.,  he  can  afford  to  pay 
three  times  as  much  rent  for  the  first.  The  high 
rent  does  not  add  to  the  cost  or  price  of  the  pota- 
toes, because  what  is  added  on  each  bushel  in  rent 
is  saved  on  each  bushel  in  labor,  etc.  There  is  per- 
haps another  acre  so  poor  that  "  it  does  not  pay  to 
grow  potatoes  on  it  unless  you  get  it  for  nothing." 


130  ECONOMICS  FOR  THE  PEOPLE. 

This  pays  no  rent :  it  is  what  economists  call  "  no- 
rent  land."  Thus  rent,  high  or  low,  is  the  meas- 
ure of  the  increased  productiveness  of  a  piece  of 
land  over  no-rent  land,  and  it  does  not  affect  the 
price  of  products.  This  is  known  as  Ricardo's 
doctrine  of  rent,  though  a  Scotchman  named  An- 
derson preceded  that  great  English  economist  in 
stating  it.  Superior  land  is  like  labor-saving  ma- 
chinery:  the  cost  is  saved  in  facility  of  production. 
This  holds  true  even  in  city  rents ;  Mr.  Stewart's 
great  store  in  New  York  never  charged  higher 
prices  for  goods,  though  the  land  was  among  the 
most  valuable  in  New  York,  for  the  reason  that  its 
situation  made  it  very  productive  of  trade.  So 
many  people  came  there  to  buy  that  the  big  rent, 
divided  among  all  the  purchases,  came  to  no  more 
than  the  smaller  rent  of  other  stores. 

There  may  be  land  close  by  which  produces  20 
bushels  of  wheat,  and  land  far  off  which  produces 
22  bushels.  If  it  costs  the  value  of  two  bushels  to 
bring  the  22  to  market,  the  land  close  by  and  the 
land  far  off  are  of  exactly  the  same  renting  value. 
Thus  accessibility,  or  nearness  to  a  market,  is 
equivalent  to  so  much  greater  productiveness,  and 
distant  land  is,  in  the  economic  sense,  poorer  land. 


OF  RENT.  1 3  I 

The  price  of  wheat,  or  of  any  agricultural  product, 
being  determined  by  the  cost  of  the  part  produced 
at  greatest  disadvantage,  according  to  the  first  law 
of  price,  will  depend  on  the  cost  of  that  produced 
on  the  poorest  or  most  distant  land.  The  true 
rent  of  any  given  piece  of  wheat-land,  accordingly, 
would  be  the  difference  between  the  general  price 
of  wheat  and  the  cost  of  producing  and  getting 
it  to  market  from  that  piece.  If  a  higher  rent  is 
charged,  farmers  cannot  afford  to  hire  it  to  raise 
wheat.  They  must  cither  raise  a  more  valuable 
crop  than  wheat,  or  not  hire  the  land,  or  lose 
money.  Of  course  this  general  law  is  much  modi- 
fied on  particular  pieces  of  land  by  special  circum- 
stances. 

When  the  fertile  wheat-fields  of  our  great  West 
were  opened  up,  and  the  railways  brought  them 
close  to  the  seaboard,  the  poorer  lands  East  went 
out  of  cultivation,  and  the  price  of  wheat  went 
down.  The  deserted  farm-houses  of  the  New 
Hampshire  hills  and  in  the  Connecticut  valley  in 
Massachusetts  tell  a  part  of  this  story.  Massa- 
chusetts, which  produced  119,783  bushels  of  wheat 
by  the  census  of  i860,  produced  only  18 13  by 
that  of  1890,  and  the  other  Eastern  States  reduced, 


■ 

132  ECONOMICS  FOR  THE  PEOPLE. 

or  increased  but  little,  their  acreage  and  product. 
In  England  the  farmers  could  only  afford  to  culti- 
vate the  better  wheat-lands  and  to  pay  a  lower 
rent  for  these.  But  the  existence  in  England  of 
long  leases  or  customary  rents,  and  the  great  value 
set  on  land  for  manufacturing  use  and  for  social 
reasons,  made  landlords  unwilling  to  so  reduce 
rents ;  hence  the  great  dissatisfaction  among  the 
English  farming  classes.  This  is  the  key  to  the 
great  influence  of  our  far  West  upon  the  agricult- 
ural holdings  of  England  and  our  Eastern  States. 
The  effect  of  the  increasing  wheat  crops  of  India 
and  Russia  upon  us  is  not  yet  fully  developed. 

The  free  operation  of  the  economic  laws  of  rent 
is  restricted  very  much  by  the  tenure  of  the  let- 
ting. The  labor  and  fertilizers  a  man  puts  upon 
land  do  not  come  out  again  in  the  first  crop  or  in 
the  year's  crop  ;  they  are  more  or  less  permanent 
"  improvements."  So  in  still  greater  degree  are 
the  fences  and  buildings  necessary  in  cultivating 
the  farm.  On  yearly  tenure  or  short  leases  the 
tenant  must  therefore  pay  a  lowered  rent,  or  re- 
frain from  improving  the  land.  In  New  Zealand 
each  tenant  has  the  right  of  purchase  at  a  fixed 
price,  and  can  therefore  do  his  best  for  the  land. 


OF  RENT.  133 

In  England  the  landlord  makes  most  of  the  im- 
provements, and  the  tenant  is  in  a  measure  pro- 
tected, even  in  yearly  tenancy,  by  custom  and 
what  is  called  "  a  good  understanding."  In  the 
north  of  Ireland  the  custom  called  "  Ulster  tenant- 
right  M  binds  landlords  not  to  dispossess  a  tenant 
so  long  as  he  pays  his  rent,  and  it  permits  the  ten- 
ant to  realize  on  his  improvements  by  selling  his 
tenant-right  to  another  person  acceptable  to  the 
landlord.  In  other  parts  of  Ireland  much  bad 
farming,  bad  politics,  and  bad  blood  have  come 
from  the  ill  understanding  on  this  point — the  ex- 
haustion of  land  and  evasion  of  payments  on  one 
side,  and  rack-rents  and  summary  eviction  on  the 
other.  America  has  the  great  blessing  of  absolute 
free -trade  in  land,  so  that  each  tenant  makes  his 
own  bargain  for  both  price  and  time  of  his  letting; 
but  as  only  a  small  percentage  of  the  4,700,000 
farms  in  this  country  are  rented  for  money,  the 
question  has  not  become  of  great  importance  here. 
Farms  worked  on  shares  number  more,  one  half 
or  one  third  the  crop  being  paid  for  the  use  of  the 
land,  buildings,  etc.,  and  this  system,  called  "  me- 
tayer rents,"  exists  in  many  of  the  older  countries. 
Rent,  being  the  greater  productiveness  of  the 


134  ECONOMICS  FOR  THE  PEOPLE. 

land  rented  above  the  poorest  land  actually  cul- 
tivated, tends  to  increase,  as  increasing  demand 
(by  increase  of  population  or  of  wants  otherwise) 
brings  poorer  and  poorer  land  under  cultivation. 
When  all  the  arable  land  in  the  world  is  taken 
up,  that  land  which  can  only  be  made  to  produce 
a  bare  subsistence  for  the  laborer  becomes  the  no- 
rent  land,  or  standard  from  which  rents  count,  be- 
cause from  it  the  laborer  gets  no  surplus  above 
bare  subsistence  to  pay  rent.  If  rent  were  paid 
he  has  not  enough  to  live  on,  and  as  there  is  no 
cheaper  land  he  would  die.  But  still  the  Ricardo 
doctrine  of  rent  shows  that  rent  would  not  be  a 
part  of  the  price  of  agricultural  product,  because 
it  is  only  the  equivalent  of  saved  labor,  and  the 
extreme  statement  is  made  that  if  the  whole 
$200,000,000  paid  in  England  as  rent  for  culti- 
vated lands  were  remitted,  it  "  would  not  add  a 
pinch  of  flour  to  the  sixpenny  loaf."  For  the 
price  of  bread  is  not  made  by  the  English  farmer, 
but  from  the  far-off  wheat-fields  of  Dakota,  with 
which  he  must  compete.  The  remission  of  rents 
would  be  to  the  English  farmer  so  much  gain, 
which  for  the  first  season  he  would  gladly  pocket 
himself.    At  once,  therefore,  rents  would  again 


OF  RENT.  I35 

commence ;  the  landlord  would  demand  part  of 
this  gain,  which  is  rent,  or  the  tenant  would  sub- 
let and  live  on  the  gain,  receiving  rent  instead  of 
paying  it.  So  long  as  some  land  is  better  than 
other,  and  on  this  better  land  labor  is  saved,  the 
price  of  this  labor  will,  in  the  order  of  nature,  be 
somehow  paid  as  rent.  If  the  whole  world  were 
redivided  into  equal  lots,  at  no  rent  or  equal  rent, 
the  rent  process  would  instantly  recommence,  be- 
cause each  person  would  want  the  better  lands. 
If  all  land  were  equally  productive  and  equally  ac- 
cessible there  would  be  no  rent  till  it  was  all  occu- 
pied, at  which  point  those  who  had  no  land  would 
be  ready  to  buy  or  rent  from  those  who  had. 

There  have  been  many  plans  to  abolish  private 
ownership  in  land,  and  so  get  rid  of  rent.  But  rent 
cannot  be  got  rid  of,  for  so  long  as  one  piece  of 
land  is  better  than  another,  it  would  be  better 
worth  having.  It  is  as  true  of  land  as  of  any  other 
kind  of  property,  that  if  it  were  communistically 
redistributed  at  any  moment,  the  men  with  more 
brains  or  industry  in  a  time  of  peace,  or  of  more 
force  in  a  time  of  war,  would  presently  get  hold 
of  more  land  or  better  land  than  the  men  of  less 
brains  or  less  force. 


I36  ECONOMICS  FOR  THE  PEOPLE. 

"The  nationalization  of  the  land,"  advocated  by 
Henry  George  in  "  Progress  and  Poverty,"  is  best 
stated  in  his  own  words :  "  The  remedy  for  the 
unjust  and  unequal  distribution  of  wealth  appar- 
ent in  modern  civilization,  and  for  all  the  evils 
which  flow  from  it  [is],  We  must  make  land  com- 
mon property.  ...  I  do  not  propose  either  to  pur- 
chase or  to  confiscate  private  property  in  land.  .  .  . 
Let  [present  owners]  continue  to  call  it  their  land. 
Let  them  buy  and  sell,  and  bequeath  and  devise 
it.  We  may  safely  leave  them  the  shell  if  we  take 
the  kernel.  //  is  not  necessary  to  confiscate  land ; 
it  is  only  necessary  to  confiscate  rent.  .  .  .  Appropri- 
ate rent  by  taxation.  .  .  .  Abolish  all  taxation  save 
that  tipon  land  values."  This,  it  will  be  seen,  is  not 
a  scheme  to  abolish  rent — for  Ricardo's  theory  of 
rent  is  used  by  Mr.  George  as  the  groundwork  of 
his  argument — but  to  require  private  owners  to 
pay  the  equivalent  of  rent  to  the  Government  as 
taxes.  The  private  owner  would  not  be  deprived 
of  return  for  the  capital  he  had  invested  in  build- 
ings or  other  improvements,  but  would  be  practi- 
cally a  State -tenant,  paying  ground -rent  to  the 
Government  on  a  perpetual  lease,  and  perhaps 
sub-letting  to  other  users  or  occupiers.    This,  Mr. 


OF  RENT.  I37 

George  argues,  would  prevent  the  withholding  of 
land  from  productive  use,  and  prove  the  cure-all 
for  our  social  ills. 

Herbert  Spencer,  in  his  "  Social  Statics,"  had 
already  spoken  of  such  a  "  change  of  landlords  " 
as  commanded  by  equity,  consistent  with  the  high- 
est state  of  civilization,  and  duly  subordinate  to 
the  law  of  equal  freedom.  "  Separate  ownerships 
would  merge  into  the  joint-stock  ownership  of  the 
public.  .  .  .  Stewards  would  be  public  officials  in- 
stead of  private  ones,  and  tenancy  the  only  land 
tenure."  John  Stuart  Mill  looked  forward  to  such 
a  tenure,  to  be  brought  about  by  the  purchase  of 
vested  rights  by  the  State.  The  objection  to  Mr. 
George's  plan  is  seen  in  the  fact  that  the  man  who 
owns  land  to-day  may  have  bought  it  only  yester- 
day with  the  direct  earnings  of  his  labor,  and  the 
confiscation  of  rent  would  practically  deny  to  him 
the  benefit  of  his  earnings,  and  thus  subvert  the 
foundations  of  all  private  property.  Mr.  George 
cites  against  this  the  fact  that  the  freed  slaves 
were  not  paid  for  by  our  Government  during  the 
war,  and  argues  that  the  interest  of  the  few  must 
be  put  aside  in  the  interest  of  the  many. 

The  economists  who  look  upon  Mr.  George's 


138  ECONOMICS  FOR  THE  PEOPLE. 

plan  as  indirect  communism,  nevertheless  recog- 
nize the  land  question  as  one  of  the  most  serious 
problems  in  Economics.  As  we  cannot  increase 
the  quantity  of  land,  it  is  important  that  what 
there  is  should  be  used  so  as  to  produce  most, 
and  that  the  holding  .  of  arable  lands  unused 
should  be  discouraged.  Most  economists  agree 
that  land,  and  especially  the  unearned  increment 
of  value,  is  a  proper  object  for  the  chief  burden  of 
taxation,  a  doctrine  advocated  by  Mill  as  presi- 
dent of  the  Land  Reform  Association.  The  tax- 
ation of  all  land,  unimproved  on  the  same  basis  as 
improved,  so  that  it  cannot  be  "  held  for  a  rise  " 
without  cost  and  thus  accumulated  into  great  fort- 
unes, is  likely  to  be  the  chief  method  of  raising 
revenue  in  the  future. 

Land,  then,  is  the  first  element  of  production, 
the  sine  qua  non  :  in  distribution  it  claims  its  share 
as  rent,  however  this  rent  may  be  concealed,  or 
cloaked,  or  called  by  other  names,  or  temporarily 
balanced  by  confiscating  taxation.  Without  land 
labor  has  nothing  from  which  to  produce.  The 
earth  is,  in  truth,  the  mother  of  us  all  and  of  all 
our  wealth. 


XVIII. 


CAPITAL  AND  INTEREST. 

WHEN  a  settler,  far  off  from  home  or  friends, 
and  dependent  for  his  food  on  the  little  farm  he 
has  cleared,  denies  himself  the  extra  loaf  of  bread 
he  would  like  to  eat,  that  'he  may  save  the  wheat 
as  seed  for  next  year's  crop,  he  becomes  in  that 
measure  a  capitalist,  or  owner  of  capital.  CAPITAL 
represents  that  self-denial  in  the  past  which  be- 
comes the  means  of  future  prosperity ;  it  is  that 
part  of  wealth,  i.  c\y  of  stored  labor,  used  to  pro- 
duce wealth.  As  we  spoke  of  potential  wealth,  so 
we  may  speak  of  potential  capital,  the  reserve 
which  can  be,  but  is  not  now,  being  used  to  pro- 
duce wealth. 

Capital  is  not  a  prime  factor  in  production,  be- 
cause it  can  always  be  analyzed  back  into  land 
and  labor ;  but  it  is  in  one  sense  the  most  impor- 
tant factor,  because  it  makes  possible  the  higher 


140  ECONOMICS  FOR  THE  PEOPLE. 

industrial  organization,  and  enables  labor  to  work 
to  the  best  advantage.  It  has  been  called  "  the 
universal  motor/'  because  it  keeps  everything  go- 
ing. Without  it  each  man  would  be  obliged,  like 
a  savage,  to  dig  or  hunt  his  breakfast  and  his  ma- 
terial before  he  could  get  at  the  rest  of  his  day's 
work :  there  would  be  no  division  of  labor,  and 
each  would  work  at  his  worst. 

Those  kinds  of  capital  which  can  be  used  for  a 
long  time  over  and  over  again — as  a  house,  or  me- 
chanical "  plant/'  or  the  road-bed  of  a  railway — 
are  called  fixed  capital ;  those  kinds  which,  like 
food,  fuel,  and  material,  are  commonly  used  but 
once,  and  are  destroyed  in  using,  are  called  circu- 
lating capital.  As  a  country  is  more  civilized,  the 
proportion  of  fixed  capital  increases,  and  particu- 
larly that  kind  of  fixed  capital  which  becomes 
literally  common  wealth — as  good  roads,  bettered 
watercourses,  and  sanitary  improvements.  To  in- 
vest capital  is  to  exchange  circulating  into  fixed 
capital.  But  there  is  in  fact  no  strict  line,  for 
many  things  are  destroyed  by  or  wear  out  after  a 
few  usings,/as  a  file,  and  are  between  the  two.  So, 
also,  it  is  not  possible  to  draw  a  strict  line  be- 
tween wealth  used  as  capital  or  not  used  as  capi- 


CAPITAL  AND  INTEREST.  14 1 

tal:  a  man's  breakfast  may  or  may  not  be  turned 
into  a  day's  work. 

It  is  a  mistake  to  confound  capital  with  money. 
Capital  is  not  merely  money,  but  wealth,  common- 
ly represented  in  terms  of  money;  it  is  paid  for 
by  Interest,  which  pays  not  for  the  use  of  money, 
but  for  the  use  of  those  things  which  money  buys. 
These  things  are,  in  general,  subsistence  (including 
food,  clothing,  dwelling,  fuel),  tools  (which  may  be 
a  hand-tool,  or  a  steam-engine,  or  a  factory),  mate- 
rial. A  man  first  uses  his  savings  to  make  sure 
of  to-morrow's  food;  next  for  clothing;  next  for 
a  place  to  live  in.  These  secured,  he  gets  tools,  so 
as  to  work  with  advantage  ;  last,  he  buys  materi- 
als on  which  to  use  them.  The  reason  that  capi- 
tal is  commonly  confused  with  money  is  that  a 
borrower,  wanting  food,  tools,  or  materials,  finds 
it  more  convenient  to  get  the  money  and  choose 
these  for  himself  than  to  have  the  articles  them- 
selves loaned  to  him. 

It  is  estimated  that  the  saved  wealth  of  a  coun- 
try, aside  from  what  is  deposited  by  means  of  im- 
provements in  that  great  savings-bank,  the  land, 
rarely  exceeds  two  to  three  times  its  annual  pro- 
duction, and  that,  as  to  food,  the  world  is  thus  al- 


142  ECONOMICS  FOR  THE  PEOPLE. 

ways  within  a  year  or  two  of  starvation  should 
production  cease.  The  aggregate  of  productive 
capital,  it  is  also  reckoned,  approximates  the  total 
value  of  land,  which  naturally  rises  as  increased 
capital  increases  the  demand  for  it.  The  cen- 
sus of  1880  estimated  the  total  property  of  the 
United  States,  land  included,  at  $65,037,000,000. 
Our  productive  capital  is  probably  within  $35,000,- 
000,000,  while  our  annual  product,  Mr.  Atkinson 
concludes,  is  about  $14,000,000,000.  If  all  the 
property  in  the  United  States  were  distributed 
communistically  among  its  people  there  would  be 
about  $1030  each,  or  of  annual  product  about 
$200  each.  The  census  reports  the  total  invest- 
ment (chiefly  fixed  capital)  in  manufacturing  indus- 
tries as  $6,525,156,486,  and  the  cost  of  material 
(circulating  capital)  as  $5,162,044,076,  which, 
with  $2,283,216,529  wages,  gave  a  product  of 
$9,372,437,283. 

The  man  who  by  self-denial  saves  capital  —  as, 
for  instance,  seed-corn  —  may  either  plant  it  him- 
self or  lend  it  to  others  to  plant.  If  he  refrains 
from  using  it  himself,  he  is  entitled  to  compensa- 
tion for  this  further  self-denial.  The  man  who 
borrows  does  not  borrow  unless  he  expects  to 


CAPITAL  AND  INTEREST,  143 

gain,  and  he  is  willing  to  make  payment.  This  is 
interest,  usually  stated  in  money  terms  for  a  defi- 
nite period,  as  6  per  cent,  per  year,  u  e.y  for  every 
$100  worth  borrowed  $106  is  to  be  returned  at  the 
end  of  a  year,  or  $1 12  at  the  end  of  two  years.  In 
"  compound  interest"  the  principal  and  interest 
are  added  together,  as  a  new  principal  from  which 
interest  is  reckoned,  so  that  at  the  end  of  the  sec- 
ond year  6  per  cent,  is  to  be  paid  on  §106,  making 
$112.36  to  be  returned. 

The  notion  that  capital  is  money  only,  coupled 
with  Aristotle's  doctrine  that  money  is  sterile  or 
unproductive,  has  led  to  the  general  outcry  against 
interest,  of  which  thriftless  or  dishonest  or  unsuc- 
cessful men  are  glad  to  take  advantage  to  avoid 
paying  debts.  The  Mosaic  rule  that  the  Jews 
should  not  take  interest  from  their  poor  country- 
men— really  a  direction  to  them  to  be  charitable 
— and  the  application  by  the  Church  Fathers  of 
the  words  "  gatherest  where  thou  hast  not  sown  " 
to  interest  in  general,  led  to  a  religious  prejudice 
against  interest,  which  was  held  by  Luther.  Cal- 
vin, however,  saw  that  money  is  borrowed  "  as  an 
instrument  of  production  :  it  is  not,  then,  from  the 
money  itself  that  the  profit  comes,  but  from  the 


144  ECONOMICS  FOR  THE  PEOPLE. 

use  that  is  made  of  it and  his  influence  has  help- 
ed  to  change  the  religious  sentiment  as  to  in- 
terest. 

Usury  laws,  providing  forfeiture  of  the  loan  or 
other  penalties  for  taking  more  than  a  specified 
rate  of  interest,  were  early  enacted  by  most  na- 
tions ;  but  since  the  rate  of  money  is  regulated 
not  by  law,  but  by  the  demand  for  the  things 
money  buys,  these  laws  only  made  money  harder 
to  get,  because  of  the  added  risk,  increased  instead 
of  lowering  the  actual  interest,  and  gradually  fell 
into  disuse  or  were  repealed.  Usury  laws  sup- 
posed to  protect  the  debtor  were  often  balanced 
by  imprisonment  for  debt,  supposed  to  protect  the 
creditor,  which  were  equally  useless  and  harmful. 
In  Rome  the  debtor  became  the  slave  of  the  cred- 
itor: as  much  as  48  per  cent,  interest  was  exacted 
by  Brutus  himself;  and  when  the  later  magis- 
trates "  flattered  the  people  "  by  prohibiting  in- 
terest and  abolishing  debt,  usury  became  frightful. 
On  the  contrary,  Solon's  laws  gave  Athens  free- 
dom of  contract  in  borrowing  and  abolished  debt- 
slavery,  and  though  the  rate  of  interest  was  high, 
Greece  remained  industrially  prosperous.  In  Eng- 
land, Edward  VI.  prohibited  interest ;  Elizabeth 


CAPITAL  AND  INTEREST.  145 

permitted  10  per  cent.,  and  thus  greatly  promoted 
trade  ;  a  statute  of  Anne  voided  contracts  at  above 
5  per  cent.  This  law  itself  proved  void,  and  was 
repealed  piecemeal,  and  in  1854  the  last  vestige 
of  usury  law  was  removed,  e-xcept  in  regulations 
as  to  pawnbroking.  In  this  country  all  the  States 
define,  usefully,  a  legal  rate  of  interest,  the  rate  to 
be  paid  where  no  contract  is  made,  varying  from 
5  per  cent,  in  the  older  to  10  per  cent,  in  the  Far 
West  States.  Most  of  them  fix  also  a  usury  limit, 
from  6  to  as  high  as  18  per  cent.,  the  last  in  Idaho, 
where  usury  is  a  misdemeanor  punishable  by  fine 
and  imprisonment. 

A  man  is  of  course  less  willing  to  lend  his  capi- 
tal when  he  is  not  quite  sure  he  will  get  it  back. 
Sometimes,  as  usually  at  the  West,  he  is  secured 
by  mortgage  on  real  estate  —  the  word  meaning 
"  dead-pledge,"  because  on  non-fulfilment  of  the 
bond  the  pledge,  or  property,  became  dead  to  the 
mortgagor  and  passed  to  the  mortgagee  ;  some- 
times, as  usually  at  the  South,  by  pledge  of  crops 
on  which  advances  are  made.  In  such  cases  the 
risk  depends  much  on  the  facility  which  local  laws 
and  public  opinion  give  to  the  realization  of  the 
pledge.  If  there  is  doubt  as  to  the  security  of  the 
10 


146  ECONOMICS  FOR  THE  PEOPLE. 

capital,  the  loaner  adds  insurance,  and  so  makes 
interest  higher.  On  Wall  Street,  when  a  particu- 
lar stock  was  "  short,"  that  is,  the  demand  ahead 
of  supply,  and  the  risk  of  losing  great,  as  much  as 
1  per  cent,  a  day  has  been  paid  for  the  loan  of  that 
particular  stock,  when  money  itself  on  good  secu- 
rity was  under  5  per  cent,  a  year.  Insurance  is  a 
sum  set  aside  to  balance  the  risk  of  loss;. when  it 
is  paid  to  a  fire-insurance  company,  the  company 
undertakes  to  make  good  your  house  if  it  burns 
down;  more  often,  a  man  "  insures  himself'  by 
charging  a  little  more  than  he  would  in  a  sure 
transaction.  Thus  rent  is  a  little  higher  because  a 
bad  tenant  may  abuse  the  land ;  labor  is  a  little 
higher  for  day's  work  than  if  work  is  made  sure 
for  a  whole  month ;  but,  most  of  all,  insurance  is 
felt  in  increasing  interest.  Moreover,  "  capital  is 
timid,"  and  it  is  estimated  that  "  the  unwilling- 
ness of  capital  to  emigrate/'  u  e.,  to  take  risks  in 
foreign  countries,  often  adds  2  per  cent,  to  true 
interest.  Another  element  added  to  true  interest 
is  the  cost  of  commissions  for  the  work  of  the  in- 
termediaries who  obtain  the  money  and  investi- 
gate the  security  offered.  Were  it  not  for  these, 
the  rate  of  interest  the  world  over  would  be  much 


CAPITAL  AND  INTEREST.  147 

nearer  an  average  rate  than  wages  can  be,  because 
circulating  capital  is  more  easily  transported  than 
labor. 

Interest  is  high  in  new  countries,  first  of  all,  be- 
cause labor  can  be  used  to  great  advantage  if  food 
and  tools  and  materials  can  be  got ;  for  the  use  of 
these,  therefore,  a  high  charge  can  be  paid.  On 
the  other  hand,  in  new  countries  nobody  has  had 
time  to  save  ;  capital  is  scarce,  and  must  be  brought 
from  afar.  A  high  rate  of  interest  attracts  capital, 
and  the  more  capital  flows  in  the  more  interest  is 
lowered.  A  high  rate  of  interest  carries  therefore 
its  own  cure.  But  this  is  checked,  and  interest, 
secondly,  raised,  by  the  tendency  of  a  borrowing 
community  to  make  laws  against  the  creditor 
class,  so  that  a  high  insurance  is  added  to  inter- 
est. Thirdly,  these  countries  are  distant  from 
centres  of  capital,  and  their  conditions  little  known, 
so  that  commissions  are  high.  Many  Western  com- 
munities, in  trying  to  make  interest  cheap  by  law, 
make  it  cost  more.  Stable  government,  good  laws, 
and  commercial  honesty  are  what  give  a  commu- 
nity the  lowest  market  rate  of  interest.  Thus  the 
United  States  can  now  borrow  on  its  bonds  and 
Great  Britain  on  its  "consols"  (consolidated  bonds) 


148  ECONOMICS  FOR  THE  PEOPLE. 

at  3  per  cent.,  while  repudiating  States  are  check- 
ed in  development  by  paying  the  penalty  of  enor- 
mous rates  of  interest. 

Proudhon,  the  French  socialist,  who  warred 
against  capital  and  held  that  "  property  is  rob- 
bery," organized  a  "  People's  Bank,"  which  was  to 
abolish  interest  proper,  to  get  rid  of  insurance  by 
dividing  the  loss  among  all  the  depositors,  and  to 
bring  the  rate  of  interest  down  to  the  mere  cost 
of  administration.  Before  it  got  to  that  point  the 
bank  failed,  just  as  the  man's  horse  died  when  he 
had  him  down  to  one  straw  a  day  and  expected 
him  to  live  on  nothing  to-morrow.  No  scheme  or 
law  can  make  people  lend  things  for  nothing.  The 
increasing  savings  from  the  increased  productive 
power  of  the  world,  the  greater  security  of  prop- 
erty, and  the  new  facilities  of  intercommunication 
are,  however,  steadily  lowering  interest.  As  the 
world  progresses,  wages,  the  relative  share  of  la- 
bor, are  rising,  and  interest,  the  relative  share  of 
capital,  is  falling ;  and  it  is  not  progress,  but  mis- 
taken legislation,  that  acts  against  industry.  Capi- 
tal, in  fact,  enables  labor  to  earn  more  with  less 
effort  in  the  same  time.  Thus  capital  is  the  friend 
of  labor.    Its  function  is  to  make  labor  more  pro- 


CAPITAL  AND  INTEREST.  149 

ductive,  by  enabling  it  to  work  to  more  advantage, 
under  better  conditions,  with  better  tools,  and  es- 
pecially to  make  possible  the  division  of  labor.  It 
enables  labor  also  to  avail  itself  of  the  forces  of 
nature.  It  enables  the  laborer  to  earn  a  full  dol- 
lar where  otherwise  he  would  only  have  earned 
a  half-dollar,  and  it  gives  him  for  his  dollar,  in 
product,  more  than  twice  as  much  as  he  could 
have  got  for  his  half-dollar.  It  is  not  capital  or 
interest,  but  the  abuse  of  riches,  that  invites  an- 
tagonism from  labor,  as  we  shall  see  later  on. 


XIX. 


OF  LABOR  AND  THE  DIVISION  OF  LABOR. 

The  prime  factors  of  wealth  are  Land,  from 
which  we  get  the  original  material,  and  LABOR, 
which  gives  to  that  material  most  of  its  final 
value.  If  land  is  the  mother,  labor  is  the  father 
of  wealth.  Capital,  which  is  past  labor  stored, 
makes  labor  more  productive  by  enabling  it  to 
use  the  forces  of  nature,  by  giving  it  better  con- 
ditions of  work,  and  by  promoting  the  division  of 
labor.  Brains,  which  is  head  labor,  looking  into 
the  future,  makes  labor  more  productive  by  di- 
recting it  so  as  to  avoid  waste,  to  work  to  most 
advantage,  and  to  meet  the  conditions  of  the  mar- 
ket. Both  help  labor  to  "  a  fair  chance."  With- 
out their  aid  labor  is  like  a  workman  without  tools, 
and  blind.  When,  under  fair  conditions  of  land 
tenure,  labor,  capital,  and  brains  are  in  harmony, 
production  is  greatest,  and  there  is  more  product 
to  be  shared  among  all. 


OF  LABOR.  1 5  I 

The  progress  of  industry  consists  in  the  increase 
of  production  from  a  given  amount  of  human  la- 
bor. The  great  steps  forward  in  civilization  have 
been  the  harnessing  of  the  forces  of  nature  to  do 
work  for  men  —  the  discovery  of  fire,  the  taming 
of  animals,  the  use  of  wind  and  water  power,  the 
production  of  gunpowder,  the  invention  of  the 
steam-engine  (which  alone  has  multiplied  the 
working  power  of  the  world  a  hundred-fold),  and 
the  application  of  electricity.  Without  machin- 
ery, which  is  one  form  of  capital — the  stove,  the 
wagon,  the  windmill,  the  ship,  the  water-wheel, 
the  blasting-drill,  the  engine,  the  electric  battery — 
labor  would  still  be  in  its  infancy,  earning  only  the 
wages  of  a  child.  Alongside  of  these  improve- 
ments has  been  the  bettering  of  the  conditions  of 
labor  —  in  housing,  clothing,  and  heating,  so  that 
there  may  be  no  waste  of  fuel  in  the  human  ma- 
chine ;  in  better  and  cheaper  food,  in  improved 
hand -tools,  last  and  best  in  developing  man  as 
man,  so  that  his  body  becomes  the  better  servant 
of  his  higher  nature.  Finally,  the  division  of  la- 
bor, so  that  each  man  may  do  that  work  by  which 
he  can  produce  most,  has  been  the  crowning  tri- 
umph of  economic  progress. 


152  ECONOMICS  FOR  THE  PEOPLE. 

The  division  of  labor  commenced,  with  the  sav- 
ing of  capital,  in  very  early  times,  when  one  man 
ceased  to  make  everything  he  needed  for  himself, 
and  by  doing  fewer  things  more  effectively  saved 
a  surplus  which  he  exchanged  for  other  things 
made  by  other  men.  Thus  he  learns  his  one  trade 
earlier  and  easier.  He  becomes  more  skilled  in 
one  kind  than  he  could  be  in  several  kinds  of 
work..  He  saves  the  time  he  would  lose  in  pass- 
ing from  one  work  to  another.  He  knows  his 
work  so  well  that  he  begins  to  make  little  im- 
provements and  inventions  that  help  it,  as  the  boy 
Humphrey  Potter  tied  a  string  from  the  stopcock 
to  the  walking- beam  of  his  steam-pump,  and  so 
helped  to  make  the  steam-engine  of  to-day.  The 
strong  man  can  do  the  hard  work,  and  leave  the 
easier  work  to  the  weak,  as  women  and  children. 
In  a  hundred  ways  the  division  of  labor  has  ful- 
filled the  great  economic  purpose  of  getting  most 
with  least  work,  until  at  last  we  have,  with  the 
help  of  machinery,  the  vast  industrial  organization 
which  exists  to-day,  an  organization  of  the  highest 
type  and  of  the  greatest  producing  power.  In  the 
great  factory  which  makes  only  one  kind  of  cot- 
ton cloth,  great  numbers  of  men  work  with  their 


OF  LABOR.  153 

hands  to  do  one  thing  useless  by  itself ;  others 
serve  as  watchmen  ;  others  oversee  ;  others  keep 
books;  others  exchange  the  product;  others  lend 
the  money  to  buy  material  and  tools,  to  hire  build- 
ings and  land  ;  while  somewhere  there  is  the  hard- 
worked  brain  or  brains,  the  most  decisive  factor 
of  all,  without  which  the  organization  would  no 
longer  exist.  The  result  is  that  one  man's  work 
makes  as  much  cloth  as  fifty  did  of  old  at  weaving 
homespun  ;  each  yard  of  cloth  costs  less,  but  the 
laborer,  working  fewer  hours,  earns  more  each  day. 

It  seems  to  be  a  law  of  nature  that  the  finer  and 
more  complex  is  an  organization,  and  the  greater 
its  power,  the  more  danger  is  there  in  its  breaking 
down.  A  chain  is  only  as  strong  as  its  weakest 
link.  The  best  steam-engine  may  smash  itself  to 
bits  if  a  tiny  pin  gives  way.  The  work  of  years  in 
undermining  Hell  Gate  would  have  been  lost  if 
a  careless  workman  had  neglected  the  joining  of 
a  single  electric  wire,  or  if  the  signal  of  destruc- 
tion had  been  prematurely  made.  So  the  dan- 
gers before  our  highly  organized  industrial  system 
are  very  great.  A  new  improvement  throws  men 
out  of  work  for  a  time  ;  the  man  who  does  only 
one  thing  finds  it  difficult  to  earn  a  living  other- 


154  ECONOMICS  FOR  THE  PEOPLE. 

wise ;  or  if  the  brain  dies,  the  hands  stop.  The 
remedy  is  not  in  smashing  the  machine,  but  in 
taking  every  care  that  it  works  well.  We  shall 
see  what  this  means  later  on. 

The  great  law  of  the  division  of  labor  is  that 
each  man  shall  work  to  the  utmost  of  his  power, 
by  using  his  skill  at  its  best.  It  is  based  on  dif- 
ferences between  men  in  their  working  and  earn- 
ing power.  Production  varies  with  both  quantity 
and  quality  of  work;  the  industrious  man  pro- 
duces more  than  the  lazy  one,  the  skilled  worker 
more  than  the  unskilled.  Each  worker  is  to  learn 
what  he  can  do  best,  and  do  that.  Thus  he  con- 
tributes most  to  the  general  welfare,  and  earns 
most  for  himself.  This  applies  to  nations  as  well 
as  men.  The  higher  the  capacity  of  a  man  or  of 
a  people,  the  less  can  either  afford  to  do  the  lower 
grades  of  work.  The  farmer  cannot  afford  to  grow 
one  clip  of  wool  on  an  acre  that  will  grow  twenty 
bushels  of  wheat.  The  merchant  cannot  afford  to 
use  a  $5000  man  at  the  work  of  a  $1000  clerk,  or 
a  $1000  clerk  at  the  work  of  a  $200  boy.  He 
could  himself  sweep  out  the  store  quicker  than 
the  boy,  or  sell  goods  faster  than  his  best  clerk, 
but  he  cannot  do  the  lesser  work  if  he  is  to  have 


OF  LABOR.  155 

time  and  force  for  the  greater.  Thus,  also,  a  Mid- 
dle State  with  farm -lands  lets  wool -raising  go  to 
the  grazing  lands  of  the  Far  West  States.  One 
nation  imports  from  another  products  which  it 
cannot  raise  without  giving  up  more  profitable  in- 
dustries. A  race  capable  of  higher  work  uses  an- 
other for  its  lesser  service,  as  the  Irish,  first  doing 
the  lower  work  for  Americans,  is  now  rising  in  the 
social  scale  and  seeing  its  work  taken  up  by  the 
Chinese.  This  is  the  key  to  domestic  service  ;  the 
attendant  who  by  working  a  day  saves  you  an 
hour  enables  you  to  produce  tenfold. 

In  almost  every  product  labor  forms  the  great 
part  of  the  cost.  In  one  sense  almost  all  value 
comes  from  labor.  A  horseshoe  is  hammered 
from  a  bar  of  iron,  heated  from  a  coal-fire,  by  the 
blacksmith's  labor;  but  the  hammer  and  the  an- 
vil, the  iron  and  the  coal,  are  themselves  the  prod- 
uct of  labor,  and  the  very  mines  from  which  the 
ore  is  dug  get  a  great  part  of  their  value  from  the 
general  labor  of  society  which  has  made  them  ac- 
cessible. So,  too,  with  the  products  of  the  farmer; 
not  only  his  labor  on  the  crops,  but  the  labor 
which  grew  the  seed,  which  made  the  tools,  which 
ground  the  fertilizers,  enters  into  his  bushel  of  po- 


156  ECONOMICS  FOR  THE  PEOPLE. 

tatoes.  It  does  not  follow,  however,  that  any 
product — for  instance,  a  ton  of  pig-iron — is  in  any- 
practical  sense  all  labor.  The  rent  of  the  mine, 
the  profits  of  the  mining  operator,  of  the  trans- 
portation company,  and  of  the  furnace-man,  remain 
a  considerable  proportion  of  the  actual  price. 

In  specific  industries,  however,  the  proportion 
of  labor  to  material,  as  that  industry  receives  it, 
is  widely  different.  According  to  the  census  of 
1890,  in  brickmaking,  out  of  $67,770,695  annual 
product,  $32,695,189  (or  $300  to  each  worker)  was 
wages,  and  only  $12,639,597  material,  besides  the 
return  on  $82,578,566  capital;  and  in  watches, 
out  of  $6,051,066  product,  $3,688,927  (or  $552 
to  each  worker)  was  wages,  and  only  $995,740 
material,  besides  the  returns  on  $10,106,114  capi- 
tal; while  in  malting,  out  of  $23,442,559  product, 
but  $2,103,200  (or  $569  to  each  worker)  was 
wages,  against  $17,100,074  material,  besides  the 
return  on  $24,293,864  capital.  Our  total  annual 
manufacturing  product  was  put  at  $9,372,437,283, 
of  which  (there  being  no  report  of  rent)  $5,162,- 
044,076  was  material,  $2,283,216,529  wages,  and 
(at  5  per  cent,  on  the  $6,525,156,486  capital  in- 
vested) $326,250,000  interest.    In  this  reckoning 


OF  LABOR.  157 

material  is  counted  several  times,  e.g.,  as  wool, 
cloth,  and  clothing;  or  as  ore,  pig-iron,  bar-iron, 
and  the  finished  machine.  It  is  evident  that 
when  the  material  is  very  cheap,  as  is  clay,  or 
very  little  of  a  valuable  material  is  required  on 
which  to  put  skilled  labor,  as  in  watch -making, 
the  proportion  of  wages  to  product  is  high ;  when 
the  material  is  valuable,  as  barley,  and  the  labor 
little,  the  proportion  of  wages  to  product  is  low. 
The  amount  of  time  during  which  the  material  is 
finishing,  and  the  cost  of  plant  necessary  for  its 
treatment,  also  reduce  the  proportion  of  labor  to 
capital.  One  of  the  best  illustrations  of  the  rela- 
tive total  returns  to  labor  and  to  capital  is  found 
in  the  statistics  of  M.  Godin's  great  co-operative  ex- 
periment, the  Familistere  at  Guise,  France,  where 
the  remuneration  to  labor  is  found  to  be  eight 
times  that  to  the  capitalist. 

As  we  rise  in  the  scale  of  industry  the  original 
material  bears  a  less  and  less  proportion  to  the 
lgbor  involved.  There  is,  finally,  one  great  excep- 
tion to  the  general  truth  that  labor  must  have  ma- 
terial from  the  earth  from  which  to  produce,  and 
that  is  the  immaterial  labor  of  the  producer  of 
ideas.    The  work  of  the  writer,  the  artist,  the  in- 


158  ECONOMICS  FOR  THE  PEOPLE. 

ventor,  is  creation,  the  giving  of  material  form  to 
an  immaterial  idea.  The  consumption  of  brain- 
fibre  or  the  food  from  which  it  comes,  and  of  the 
paper  and  ink,  the  colors  and  the  canvas,  the 
metal,  or  what  material  it  may  be,  Is  so  incon- 
siderable as  to  be  of  no  account.  Yet  a  book,  a 
painting,  a  piece  of  music,  an  improvement  in  ma- 
chinery, have  the  highest  of  exchangeable  values. 
They  are  the  divine  instruments,  the  tools  of  God, 
by  which  humanity  itself  is  shaped  to  fairer  fash- 
ion. The  invention  of  the  cotton-gin  and  the 
writing  of  "  Uncle  Tom's  Cabin  "  were  chief  fac- 
tors in  making  possible  the  abolition  of  slavery, 
and  the  Proclamation  of  Emancipation  has  added 
more  to  the  economic  progress  of  this  nation  than 
any  act  since  the  Declaration  of  Independence. 


XX. 

THE  WAGES  QUESTION. 

THE  share  of  LABOR,  in  distribution,  is  Wages. 
Work  done  under  direction  earns  wages  ;  directing 
work,  as  we  shall  see  later,  earns  profit.  The  word 
Labor  usually  refers  to  work  thus  under  direction. 
The  "wages  question"  is,  therefore,  what  is  the 
proper  share  of  the  laborer,  working  under  direc- 
tion, in  the  distribution  of  product  ?  There  can  be 
no  more  important  question  in  a  country  organ- 
ized "  for  the  greatest  good  of  the  greatest  num- 
ber," in  which  wage -earners  make  up  the  great 
body  of  the  commonwealth. 

The  word  Wages,  unfortunately,  is  used  both  in 
a  general  sense  to  mean  the  pay  of  labor,  whether 
by  time,  by  piece,  or  by  share  of  product,  and  in 
a  specific  sense  to  mean  time-wages,  or,  as  defined 
by  Professor  Sumner,  "the  payment  per  unit  of 
time  by  the  employer,  in  return  for  which  the  em- 


l6o  ECONOMICS  FOR  THE  PEOPLE. 


ploye  agrees  to  use  his  productive  powers  during 
the  time  specified  as  the  employer  may  direct." 
This  lack  of  distinctive  words  has  led  to  real  con- 
fusion in  arguments.  It  is,  perhaps,  most  clear  to 
use  the  word  wages  in  the  general  sense,  and  the 
phrases  time-wages,  piece-wages,  and  share-wages 
for  the  different  ways  of  payment.  Time-wages 
may  be  by  the  hour,  day,  week,  month,  or  year;  in 
comparing  day-wages  with  year-wages,  it  must  al- 
ways be  asked  how  much  of  the  year  the  laborer 
has  had  work.  Piece-wages  is  the  pay  per  article 
produced.  Share-wages,  which  correspond  to  me- 
tayer rents,  may  be  a  share  of  the  product  itself  or 
its  equivalent  in  money ;  this  transfers  to  the  la- 
borer a  part  of  the  risk  usually  taken  by  the  em- 
ployer. The  " sliding  scale"  of  payment  in  coal- 
mining, where  miners  get  so  many  cents  per  ton 
when  coal  is  at  a  stated  price,  and  so  much  more 
when  it  is  higher,  is  a  combination  of  piece  and 
share  wages.  The  "truck  system  "  of  payment  has 
no  reference  to  any  of  these,  but  means  that  the 
employe  is  given  orders  for  goods  instead  of  mon- 
ey, a  system  so  much  abused  by  employers  who 
were  store-keepers  and  charged  extortionate  prices, 
that  in  some  parts  it  is  forbidden  by  law. 


THE  WAGES  QUESTION.  l6l 

The  confusion  of  time-wages  and  piece-wages,  in 
reckoning  the  cost  of  labor,  has  created  extraordi- 
nary confusion  of  the  wages  question.  It  is  often 
asked,  does  price  make  wages,  or  do  wages  make 
price,  e.g.,  does  a  factory  girl  get  a  dollar  a  day 
because  a  yard  of  cotton  is  ten  cents,  or  is  cotton 
ten  cents  because  factory  girls  get  a  dollar  a  day? 
The  question  is  not  rightly  put,  partly  because 
price  varies  from  cost  with  demand  and  supply ; 
partly  because  wages  are  only  one  element  of  cost ; 
but  chiefly  because  it  is  time -wages  which  are 
here  meant,  and  the  cost  of  labor  cannot  be  reck- 
oned from  time -wages.  The  actual  pay  of  any 
given  laborer  is  determined  by  his  productive 
power,  the  amount  of  product  or  number  of  pieces 
he  can  turn  out  in  a  given  time.  A  man  who  can 
make  two  pair  of  shoes  in  a  day  will,  in  the  long 
run,  earn  twice  as  much  as  a  man  who  can  make 
only  one  pair;  his  pay,  looking  at  piece -wages, 
would  be  the  same,  though  his  "  wages,"  in  the 
sense  of  time- wages,  would  seem  to  be  double. 
Two  men  of  equal  skill  working  in  the  same  shop, 
under  like  conditions,  will,  as  a  matter  of  fact,  earn 
about  the  same  by  the  week's  end,  though  one  is 
working  "  by  piece,"  the  other  "  by  time."  But  in 
ii 


1 62  ECONOMICS  FOR  THE  PEOPLE. 


the  case  of  two  men  working,  as  in  different  coun- 
tries, under  quite  different  conditions  of  strength, 
industry,  skill,  tools,  machinery,  etc.,  time -wages 
will  not  be  at  all  alike,  though  piece-wages  may 
be  nearly  the  same.  Thus  an  American  shoe  manu- 
facturer, paying  nearly  double  English  time-wages, 
gets  shoes  made  for  only  33  cents  per  pair  which 
cost  an  English  manufacturer  50  cents  for  labor. 
Thus,  also,  an  English  manufacturer  pays  twice  or 
thrice  the  time-wages  of  German,  French,  and  Ital- 
ian, and  yet  finds  the  labor-cost  less.  American 
labor,  with  its  advantages  of  pluck,  skill,  and  ma- 
chinery, is  at  once  the  highest  and  the  cheapest 
in  the  world.  On  such  questions  as  the  tariff  we 
have  been  wasting  words  in  talking  about  "  wages," 
meaning  time-wages,  and  overlooking  piece-wages. 
The  higher  time-wages  in  England  and  Germany 
show  that  the  question  is  not  one  of  "protection" 
and  free-trade.  The  question  is  always,  how  much 
can  the  laborer  produce? 

The  fallacy  of  reckoning  price  or  basing  a  cur- 
rency on  "  labor-value,"  so  called,  was  shown  when 
Robert  Owen,  about  1830,  opened  his  "  labor-ex- 
change" in  London,  and  bought  and  sold  goods 
with  notes  representing  the  "  labor-value  "  (or  num- 


THE  WAGES  QUESTION.  163 

ber  of  hours*  work)  in  each.  His  customers  quick- 
ly used  these  notes  to  buy  up  all  the  desirable 
goods  in  his  store,  which,  being  left  with  a  great 
stock  of  unsalable  things,  failed  in  a  few  weeks. 

Product  pays  all.  Wages  increase  with  product. 
These  arc  the  two  main  facts  of  "  the  wages  ques- 
tion." Out  of  product  must  come  the  returns  to 
land,  capital,  labor,  and  the  directing  brains.  Rent, 
the  equivalent  of  labor  saved,  and  interest,  a  pay- 
ment for  help  to  labor,  are  comparatively  fixed, 
and  do  not  decrease  the  pay  of  labor.  Wages  re- 
main the  chief  and  the  most  variable  part  of  cost. 
Profit,  the  pay  of  the  director  of  industry,  is,  we 
shall  see,  the  difference  between  cost  and  price, 
involving  the  risk  of  loss  when,  for  the  time  being, 
price  falls  below  cost.  Labor  cannot  get  more 
than  all  there  is  to  divide ;  it  gets  less  by  the 
amount  of  rent  and  interest,  and  if  there  is  no  mar- 
gin left  for  profit,  the  employer  is  driven  out  of 
business,  the  demand  for  labor  is  less,  and  wages 
fall.  Out  of  a  fixed  product,  therefore,  labor  can- 
not get  more  unless  the  others  get  less,  and  in 
crippling  them,  labor  cripples  itself.  Out  of  an 
increasing  product,  labor  not  only  gets  more,  but 
gets  a  greater  proportion,  rent  and  interest  being 


164  ECONOMICS  FOR  THE  PEOPLE. 

the  more  fixed,  unless  the  profit-maker  gets  the 
difference.  But  it  is  a  fact  in  progress  that  "  in 
any  given  product,  profits  diminish,  wages  increase.,, 
Thus  labor,  paid  out  of  product,  gets  more  and 
more  wages  as  product  increases. 

For  a  long  time  English  economists  held  that 
wages  did  not  depend  upon  product,  and  could  not 
exceed  "  the  portion  of  the  existing  capital  availa- 
ble to  pay  labor,"  which  they  called  the  Wage- 
fund.  This  was  another  of  the  mistakes  which 
arose  from  the  confusion  of  wealth  with  money. 
It  was  noticed  that  money  was  paid  out  for  wages 
before  the  goods  were  sold  or  even  finished.  But, 
as  a  matter  of  fact,  an  additional  value  had  been 
created  by  labor,  greater  than  the  amount  of  the 
wages,  before  the  wages  were  paid,  for  payments 
are  almost  always,  with  such  exceptions  as  a  law- 
yer's retainer,  made  at  the  end  of  the  day,  the 
week,  or  the  job,  not  at  the  beginning.  The  em- 
ployer may  not  have  turned  this  added  value  into 
money,  but  he  can  usually  borrow  on  or  sell  half- 
finished  products,  were  it  not  that  he  prefers  to 
wait  to  get  the  full  price  for  the  completed  goods. 
Instead,  therefore,  of  distributing  the  product  of 
the  work  among  his  workmen  as  their  wages,  re- 


THE  WAGES  QUESTION.  165 

serving  his  own  share,  he  pays  the  equivalent  in 
money.  But  the  greater  the  product  of  the  day 
or  the  week  the  more  wealth  he  has,  the  more 
money  he  can  get,  the  more  wages  he  can  pay.  It 
is  true  that  a  man  must  first  eat  his  breakfast  be- 
fore he  can  do  his  day's  work,  must  have  tools  or 
machinery  or  a  fit  building  to  do  his  work  well,  but 
in  no  sense  is  the  capital  so  employed  distributed 
to  him  as  wages.  Each  man  begins  on  what  has 
been  previously  stored,  as  in  infancy  he  lives  upon 
his  mother's  milk,  but  this  has  no  relation  what- 
ever to  the  payments  made  to  him  for  work  done. 
The  Wage-fund  notion  lent  itself  to  the  mistake 
that  the  more  workers  the  less  would  be  the  wages 
of  each,  and  that  one  man  could  not  get  higher 
wages  without  another  getting  lower  wrages.  If 
product,  like  land,  could  not  be  increased,  the  few- 
er people  the  more  each  would  have,  but  product 
multiplies  and  so  gives  a  larger  share  for  each. 

It  has  also  been  said  that  labor  is  not  paid  out 
of  product,  because  wages  are  predetermined  by 
agreement.  But  the  arrangement  is  based  on  the 
calculation  of  product,  and  is  only  another  exam- 
ple of  the  commutation  of  indefinite  shares  for 
definite  money  payments  found  in  rent  and  in  in- 


1 66  ECONOMICS  FOR  THE  PEOPLE. 

terest  also.  The  risk  is  taken  from  labor,  but  the 
pay  is  all  the  same  an  advance  estimated  with  regard 
to  product.    Always  it  is  the  product  which  pays. 

There  has  been  much  discussion  among  econo- 
mists  as  to  whether  labor  is  a  "  commodity/'  that 
is  to  say,  whether  the  pay  for  it  follows  the  ordi- 
nary laws  of  price  for  things  sold  in  the  market. 
The  truth  seems  to  be  that,  for  the  most  part, 
wages  are  determined  by  these  same  laws,  but  that 
these  laws  are  greatly  modified  by  several  distinct- 
ive elements  :  that  while  things  merely  deterio- 
rate by  keeping,  labor  unused  for  a  day  is  absolutely 
lost ;  that  the  human  machine  is  much  more  vari- 
able in  its  requirements  and  results  (as  food,  con- 
ditions of  work,  and  product)  than  any  other  ;  and, 
above  all,  the  human  or  mental  element,  in  which 
emotions  and  affections  play  a  part  as  strong  at 
least  as  dollars  and  cents.  "  Man  is  of  all  lug- 
gage," said  Adam  Smith, "  the  most  difficult  to  be 
transported."  He  gives  "  hostages  to  fortune,"  said 
Bacon.  He  is  anchored  in  his  home.  These  con- 
ditions  separate  the  real  man  from  the  thing  or 
the  "  economic  man,"  and  give  us  reason  to  take 
care  that  our  economic  organization  recognizes 
human  distinctions. 


XXI. 


THE   RATE  OF  WAGES. 

WAGES  cannot  rule  higher  than  the  point  at 
which  an  employer  must  stop  work  or  lose  money. 
Wages  cannot  rule  lower  than  the  cost  of  living  of 
the  laborer  with  so  much  of  a  family  as  will  keep 
up  the  supply  of  labor  for  the  immediate  future. 
Employers,  nevertheless,  often  keep  mills  going  at 
temporary  loss,  because  of  sympathy  with  their 
employes,  or  because  it  would  be  still  greater  loss 
to  let  the  "  plant  "  lie  idle,  or  in  the  hope  of  cov- 
ering the  loss  by  early  gain,  and  laborers  some- 
times find  themselves  compelled  to  work  below 
the  cost  of  decent  maintenance,  using  up  their 
savings  or  running  into  debt,  rather  than  to  be 
without  work  at  all.  A  man,  wife,  and  two  or  more 
children  (so  that  at  least  two  shall  grow  up)  must 
be  provided  for  in  average  wages,  except  so  far  as 
women  and  children  help  to  earn.    The  census  re- 


1 68         ECONOMICS  FOR  THE  PEOPLE. 

turns  show  that  each  worker  supported,  on  the 
average,  a  group  of  three  persons.  The  average 
wages  in  all  American  manufactures  were  $484,  or 
in  1890  about  $1.60  per  working-day. 

The  lowest  time-wages  in  the  world  are  those  of 
the  common  laborers  in  China  and  on  the  African 
coast,  who  live  on  a  few  handfuls  of  rice  and  earn 
a  few  cents  a  day.  This  ill-fed  and  ill-paid  labor 
cannot  compete  with  the  best-paid  American  la- 
bor; the  "  Fabrica  de  Tocuyos,"  at  Lima,  Peru, 
which  made  coarse  cottons  from  Chinese  labor  at 
$4  per  month,  found  it  difficult  to  compete  in  Peru 
with  New  England  cottons  whose  price  was  raised 
by  the  high  Peruvian  tariff.  A  half-fed  horse  will 
do  only  half-work.  So  with  a  mail.  Ten  laborers 
in  Ireland  raised  less  than  four  in  England.  Bras- 
sey,  building  the  Paris  and  Rouen  railway  in  1842, 
employed  10,000  men,  of  whom  4000  were  taken 
at  great  expense  from  England  ;  side  by  side,  in 
the  same  quarry,  Frenchmen  worked  at  three 
francs,  Irish  at  four  francs,  and  English  at  six 
francs  a  day,  and  it  was  the  English  work  that 
cost  least.  On  East  Indian  railways,  coolies,  liv- 
ing on  two  pounds  of  rice  and  a  pinch  of  curry  for 
4  to  6  cents  a  day,  and  knocking  off  work  when 


THE  RATE  OF  WAGES.  1 69 

their  wants  were  supplied,  earned  from  8  to  12 
cents  for  a  day's  work,  yet  for  all  but  rough  earth- 
work the  cost  of  railway  work  proved  the  same  in 
India  as  in  England.  In  farming,  it  has  been 
shown  that  two  English  mowers  will  cut  as  much 
grass  as  six  Russian  serfs ;  under  low  time-wages 
the  yield  of  crops  in  Russia  is  less  than  half  that 
of  England,  and  the  smallest  in  Europe. 

"  Experience  teaches,"  says  the  younger  Bras- 
sey,  "  that  there  is  a  most  remarkable  tendency  to 
equality  in  the  actual  cost  of  work  throughout  the 
world."  Where  difference  exists,  it  is  usually  found 
that  the  lowest  labor -cost  (piece -wages)  is  asso- 
ciated with  the  highest  time-wages.  Thus  Eng- 
land, paying  higher  time-wages  than  France,  Ger- 
many, or  any  other  European  country,  commands 
the  trade  of  the  world,  especially  in  manufactured 
goods.  When  we  get  our  materials  cheaper,  the 
still  higher  time-wages  of  the  United  States  will 
probably  bring  us  much  of  England's  export  trade. 
"  The  higher  wages  of  American  labor,"  said  Sec- 
retary Manning,  "  are  at  once  the  secret  and  the 
security  of  our  capacity  to  distance  all  competi- 
tion from  i  pauper  labor  '  in  any  market." 

The  laborer,  selling  his  labor,  seeks,  of  course,  like 


170  ECONOMICS  FOR  THE  PEOPLE. 

any  other  seller,  to  get  the  full  market-price  from 
the  buyer.  The  "  heathen  Chinee/'  with  his  dread- 
ed "  cheap  labor,"  soon  learns  to  ask  as  much  as  the 
Irish  washer-woman  for  washing  a  dozen  of  clothes, 
and  as  a  domestic  servant  he  gets  $20  a  month  or 
more  in  California.  This  tends  to  equalize  labor- 
cost  by  levelling  wages  up. 

Wages,  nevertheless,  vary  in  different  countries 
or — often  quite  as  much — in  different  parts  of  the 
same  country,  as  well  as  in  different  occupations, 
according  to  various  conditions,  chiefly  dependent 
on  local  conditions  of  supply  and  demand.  The 
Labor  Report  of  1879  reported  painters  as  earning 
$7  to  $8  per  week  in  Great  Britain,  $10  to  $16 
in  New  York,  $6  to  $12  in  Chicago.  Carpenters 
in  New  York  city  are  said  to  average  $641  per 
year,  and  in  New  Jersey,  just  across  the  river,  $476. 
For  1882,  farm  wages  were  reported  at  $8.10  per 
month  in  North  Carolina,  $17.95  in  Iowa,  $27.08 
in  Colorado.  Much  of  this  is  difference  in  time- 
wages  but  not  in  piece-wages,  as  the  higher  paid 
men  do  the  most  and  the  best  work,  and  so  are 
drawn  to  the  cities  and  other  superior  labor-mar- 
kets. Such  real  difference  as  there  is  within  the 
same  occupation  is  largely  accounted  for  by  the 


THE  RATE  OF  WAGES.  171 

fact  that  labor  cannot  flow  instantaneously  to  the 
best  market. 

As  between  different  occupations,  the  differences 
are  more  real.  The  average  pay  of  brickmakers 
(census  of  1890)  was  $300;  of  cotton-operatives, 
$313  ;  of  wool-operatives,  $360  ;  of  glass-workers, 
$480;  of  watch-makers,  $552.  High  cost  (in  time 
or  money)  of  learning  a  trade,  or  its  disagreeable- 
ness,  makes  workers  fewer  and  wages  higher.  The 
probable  irregularity  of  employment  or  the  im- 
probability of  success  adds  an  element  of  insur- 
ance to  wages.  The  superiority  of  physical  skill 
or  moral  quality,  as  honesty,  required,  is  another 
element.  "We  want  a  man  who  won't  lie  to  us, 
and  we  pay  for  that,"  said  a  large  employer.  So, 
also,  in  any  one  trade,  superior  skill  or  unusual  fit- 
ness, accomplishing  more,  gets  higher  wages.  Thus 
it  is  impossible  to  say  that  all  workers,  or  all  the 
workers  in  any  one  trade,  shall  get  the  same  wages  ; 
it  is  against  the  laws  of  nature.  If  a  trade  is  un- 
derpaid, workers  will  go  out  of  it ;  if  overpaid, 
they  will  flock  in  ;  but  the  average  thus  produced 
can  never  equalize  the  conditions  of  particular 
trades  and  individuals.  There  are  here  real  dif- 
ferences of  value  of  work  which  must  count. 


172  ECONOMICS  FOR  THE  PEOPLE. 

As  between  different  periods,  the  invention  of 
the  steam-engine  and  of  labor-saving  machinery 
has  so  revolutionized  labor  that  wages  before  and 
after  their  date  are  difficult  to  compare.  There 
has  also  been  a  tendency  to  simplify  the  old  com- 
plex payments  in  kind  and  in  privileges  as  well 
as  money,  into  direct  money  wages.  In  the  thir- 
teenth century,  according  to  Thorold  Rogers, 
English  field-labor  was  paid  2d.  a  day  for  men,  id. 
for  women,  a  halfpenny  for  children  (doubled  in 
harvest),  aggregating  in  the  year  £2  i$s.  for  a  sin- 
gle man,  or  £4  with  wife  and  two  children.  A 
country  artisan,  working  300  days,  earned  ^3  i$s. 
to  £$  ;  one  in  London,  £6  or  more.  Mutton  and 
beef  were  a  farthing  a  pound  ;  a  laborers  board 
i\d.  to  \\d.  a  day.  Five  hundred  years  after,  in 
1760,  the  division  of  money  and  the  rise  of  prices 
giving  the  penny  but  one-twelfth  the  purchasing 
power,  the  English  laborer,  he  thinks,  was  less  well 
paid,  with  less  hold  on  the  land.  For  two  of  these 
centuries  the  condition  of  labor  was  steadily  good, 
but  the  coinage  of  base  money,  the  confiscation  of 
the  benefit  funds  of  the  guilds,  and  the  act  of  Eliz- 
abeth providing  that  no  person  should  practise 
any  art  without  seven  years*  apprenticeship,  and 


THE  RATE  OF  WAGES.  1 73 

empowering  the  justices  in  Quarter  Sessions  to  fix 
the  rate  of  wages  in  husbandry  and  handicrafts, 
worked  together  to  debase  labor  and  lower  wages. 
This  "  conspiracy  to  cheat  the  English  workman 
of  his  wages,"  lasting  two  centuries  and  a  half 
(1 563-1824),  compelled  the  enactment  of  the  ac- 
cursed poor-law,  which,  by  prohibiting  free  move- 
ment from  one  parish  to  another,  and  by  pauper- 
izing labor  through  the  doling  out  of  poor  rates, 
and  thus  preventing  a  natural  increase  of  wages, 
held  back  labor  from  its  due  share  in  progress. 
The  new  demand  for  labor  under  the  factory  sys- 
tem gave  the  working-man  a  new  chance.  The 
general  tendency  of  progress  since,  where  labor 
and  trade  have  not  been  hampered  by  restrictive 
laws,  has  been  to  increase  the  time-wages  of  the 
laborer  and  reduce  the  cost  of  most  of  his  sup- 
plies. 

Up  to  the  present  century,  legislation  as  to 
wages  was  always  against  labor.  It  was  denied  an 
even  chance.  The  tide  has  now  happily  turned, 
and  not  only  have  the  old  laws  been  repealed,  but 
various  legislative  safeguards  have  been  given  to 
labor  to  protect  it  from  abuse  and  to  help  it  to 
the  point  where  it  would  have  been  without  the 


174  ECONOMICS  FOR  THE  PEOPLE. 

legislation  against  it.  "  During  the  present  cent- 
ury," says  the  Duke  of  Argyle,  "  two  great  dis- 
coveries have  been  made  in  the  science  of  gov- 
ernment :  the  one  is  the  immense  advantage  of 
abolishing  restrictions  upon  trade  ;  the  other  is  the 
absolute  necessity  of  imposing  restrictions  upon  " 
[z.  e.,  upon  the  abuse  of]  "  labor."  Out  of  this  spirit 
have  come  the  factory  laws,  the  employers'  liabili- 
ty acts,  and  the  laws  for  the  protection  of  children, 
in  modern  England  ;  out  of  this  comes  also  the  agi- 
tation for  the  eight-hour  law.  The  danger  now  is 
that  legislation  will  be  pushed  too  far  in  the  oth- 
er direction,  so  that  by  crippling  employers  and 
frightening  capital,  the  demand  for  labor  will  be 
reduced.  Ill-advised  laws  harm  labor.  No  em- 
ployer can  pay  ten  hours'  wage  for  eight  hours' 
work,  or  pay  the  poor  workman  as  much  as  the 
good  one.  If  he  did  he  would  fail,  and  throw  all 
his  laborers  out  of  work.  The  law,  it  seems  prob- 
able, cannot  usefully  go  further  than  to  define  a 
legal  day's  work  where  no  contract  is  made. 

There  are  many  who  think  that  by  limiting 
work,  or  the  speed  at  which  they  work,  wages  can 
be  raised.  What  this  really  means  is  that  by  re- 
stricting men  from  working  you  can  produce  scarci- 


THE  RATE  OF  WAGES.  1 75 

ty  or  monopoly  value.  If  you  can  have  only  a 
hundred  hats  made  when  two  hundred  are  wanted, 
the  hatters,  for  the  time,  can  get  a  higher  price. 
But  this  can  be  arranged  only  in  small  skilled 
trades  for  a  very  little  time,  and  even  then  the 
community — that  is, laboring  men  in  general — must 
suffer.  Many  laborers  also  will  be  thus  kept  idle, 
and  the  workers  must  pay  through  taxes  for  their 
maintenance  as  paupers,  as  they  pay  for  the  keep 
of  convicts  when  these  are  not  made  to  work. 

There  is  one  way  in  which  restriction  does  in- 
crease wages.  In  the  Black  Death  of  1349,  Eng- 
land lost  a  third  of  her  population.  Wages  rose 
so  that  Parliament  passed  the  infamous  Statute  of 
Laborers,  which  decreed  that  no  one  should  refuse 
to  work  at,  and  no  one  should  pay  more  than,  the 
wages  "  customary  "  in  1347.  The  estate  accounts 
of  the  time  show  how  it  failed  ;  real  entries  of  6d. 
a  bushel  for  threshing  barley  were  crossed  out  and 
the  legal  2\d.  put  in.  So,  too,  the  Crimean  war 
raised  wages  throughout  Europe,  and  the  Civil  war 
wages  here.  This  is  the  bettering  of  one  man 
through  the  misfortunes  of  his  neighbors. 

Yet  the  increase  of  productiveness  is  the  one 
way  in  which  wages,  in  general,  can  be  raised. 


176  ECONOMICS  FOR  THE  PEOPLE. 

Many  wage-earners  at  one  time  looked  to  "  cheap 
money,"  L  e.,  plenty  of  greenbacks,  to  do  this.  But 
as  wages  went  up  in  greenbacks,  this  substitute- 
money  went  down  and  prices  went  up,  so  that  the 
wage-earner  could  buy  no  more,  in  fact  less,  than 
before.  For  the  rate  of  wages  is  always  to  be 
tested  by  what  wages  buy,  and  not  by  the  cur- 
rency in  which  wages  are  paid.  It  is  when  all 
workmen  work  hard,  with  the  best  advantages  of 
machinery,  that  there  is  more  product  to  divide, 
higher  wages  and  cheaper  prices,  and  the  two 
hours'  leisure  can  be  gained  because  so  much 
more  work  is  done  in  eight  hours. 


XXII. 


THE  CAPTAIN  OF  INDUSTRY!  THE  DIRECTION 
OF  LABOR. 

THERE  is  a  fourth  and  final  factor  in  produc- 
tion, overlooked  by  many  economists  and  often 
forgotten  in  the  discussions  of  working-men.  This 
is  BRAINS,  head-labor,  which  directs  labor,  and  for 
its  share  in  distribution  gets  Profit.  The  French 
speak  of  the  "entrepreneur"  or  enterprise-man,  and 
Adam  Smith  refers  to  the  "undertaker"  of  work, 
but,  for  the  most  part,  he  is  considered  an  agent 
of  capital  or  confused  with  the  capitalist  himself. 
The  word  Director  more  clearly  defines  him  ;  he 
directs  how  labor  shall  be  applied,  what  shall  be 
produced,  and  if  his  judgment  is  wrong  instead 
of  right,  the  consequent  misdirected  production 
brings  about  the  disasters  of  modern  industry. 
For  what  we  miscall  "  over-production,"  "  ill  -dis- 
tribution of  production,"  "  under- consumption," 
is  largely  the  misdirection  of  labor — over-produc- 

12 


I78  ECONOMICS  FOR  THE  PEOPLE. 

tion  of  the  wrong  thing  and  under-production  of 
the  right  thing.  The  Director  is  thus  the  impor- 
tant person  of  the  industrial  organization  —  the 
leader,  the  master,  the  captain  of  industry,  the 
organizing  force.  For  while  capital  is  timid,  the 
director  is  the  progressist.  It  is  through  him  that 
leadership,  mastery,  tells  in  the  economic  world. 

It  has  usually  been  considered  that  this  director 
or  entrepreneur  is  only  a  higher  class  of  wage-earn- 
er, and  that  profit  is  part  of  the  return  of  capital 
after  his  salary  has  been  deducted.  This  view  is 
one  result  of  the  common  association  in  one  per- 
son of  two  or  more  of  the  several  elements  in  pro- 
duction. The  shoemaker  who  buys  leather  and 
has  his  own  kit  of  tools  and  hires  men  is  to  that 
extent  a  capitalist  and  director.  But  in  the  highest 
industrial  organization  there  emerges  this  fourth 
person  as  a  distinct  class,  renting  from  the  land- 
owner, borrowing  from  the  capitalist,  employing 
laborers,  and  himself  taking  the  risk  and  reaping 
the  profit,  if  such  there  be.  The  director  may, 
indeed,  enter  the  service  of  the  capitalist  and  com- 
mute this  profit  by  accepting  salary  or  commis- 
sions. Or  a  corporation,  an  association  owning 
land  and  supplying  capital,  will  often  assume  risk, 


THE  DIRECTION  OF  LABOR.  179 

employ  managers,  and  under  the  name  of  divi- 
dends account  at  once  for  rent,  interest,  and 
profit.  But  this  payment  for  direction,  the  re- 
muneration of  brains,  is  almost  always  to  be  found, 
and  usually  in  connection  with  some  one  person. 
Somewhere  is  the  Man,  controlling  the  machine.  In 
the  modern  organization  of  industry  the  quickness 
of  competition,  requiring  alert  personal  responsi- 
bility, commonly  compels  such  concentration  of 
power  as  an  engineer  has  over  a  steam  -  engine. 
The  conservatism  and  variant  opinion  of  a  "  Board  " 
is  so  ill -fitted  to  compete,  that  the  larger  the  or- 
ganization and  the  more  successful  its  competition 
is  to  be,  the  more  likely  is  it  that  some  one  man 
will  come  forward  as  Managing  director. 

Profit  varies  more  than  any  other  share.  It  in- 
volves risk ;  it  may  become  loss.  Rent  and  inter- 
est are  usually  fixed  charges,  pre-stated;  wages  are, 
in  general,  determined  by  the  general  conditions 
of  trade  and  the  labor-market.  Profit  remains 
after  these  three  payments  have  been  deducted 
from  product.  If  product  is  insufficient  to  cover 
these  three  payments,  the  director  remains  respon- 
sible for  the  loss,  unless  he  "  fails"  to  pay,  and  so 
shifts  it  upon  one  of  the  other  agents  in  produc- 


180  ECONOMICS  FOR  THE  PEOPLE. 

tion.  Whether  product  exceed  or  fall  below  the 
sum  of  these  three  elements  of  cost  —  that  is, 
whether  it  yield  profit  or  loss  —  depends  upon 
whether  this  factor  of  brains  directs  the  labor  it 
employs  in  such  wise  as  to  make  product  under 
or  over  the  price  obtained.  Thus,  like  rent,  profit 
is  only  the  equivalent  of  labor  saved ;  like  rent,  it 
does  not  enter  into  price,  being,  in  fact,  the  dif- 
ference between  cost  and  price ;  and,  finally,  brains, 
like  land,  is  a  gift  of  nature,  of  limited  quantity 
(for  this  high  purpose)  and  of  varying  quality. 
Brains  not  able  to  earn  more  than  the  ordinary 
wages  of  the  laborer,  correspond  to  the  no -rent 
land,  and  are  pushed  out  of  the  directing  into  the 
directed  class,  as  no-rent  lands  are  thrown  out  of 
cultivation  by  the  opening  up  of  more  productive 
soil.  A  tax  on  profits  or  incomes  has  thus  the 
same  basis  logically  as  a  tax  on  rent  or  the  prod- 
uctivity of  land,  arising,  like  rent,  from  the  saving 
of  labor.  Profit  is  not,  economically,  a  return  to 
capital,  but  to  the  brains  which  can  by  better  or- 
ganization make  one  pair  of  hands  do  what  two 
did  before,  and  the  remuneration  is  not  got  by  re- 
ducing the  pay  of  the  first  pair.  As  a  matter  of 
fact,  the  productivity  of  the  first  is  raised,  and  the 


THE  DIRECTION  OF  LABOR.  l8l 

worker  presently  gets  higher  wages,  while  the  sec- 
ond worker  finds  employment  elsewhere  in  satis- 
fying the  increase  and  growing  variety  of  human 
wants.  There  is  probably  no  better  investment  of 
the  resources  of  the  community  than  the  profits  of 
ten  or  twenty-five  thousand  dollars  a  year  paid  to 
superior  directors  of  industry,  who  increase  prod- 
uct far  above  the  amount  they  get  for  them- 
selves. 

It  is  a  great  law  of  progress  by  competition,  as 
Mr.  Edward  Atkinson  has  shown,  that  "  in  any 
given  product,  profits  diminish,  wages  increase." 
Labor  gets  more  and  more,  the  director  (and  the 
capitalist)  less  and  less,  of  the  yard  of  cloth  they 
join  to  make.  The  tendency  of  profit  is  to  be- 
come nothing.  As  one  director  of  industry  takes 
advantage  of  an  improved  machine  or  a  labor-sav- 
ing method,  he  lowers  prices  to  the  lowered  scale 
of  cost,  so  that  by  increasing  his  sales  he  may  get 
greater  returns  though  at  a  lower  profit.  His  com- 
petitors presently  "meet  him"  or  "do  better." 
This  holds  true  except  when  combinations,  as  in 
the  improvements  in  making  Bessemer  steel,  deny 
this  saving  to  the  public.  Profit  is  so  apt,  indeed, 
to  be  "  undercut "  by  the  general  adoption  of  any 


1 82  ECONOMICS  FOR  THE  PEOPLE. 

one  man's  improvements,  that  it  has  been  found 
necessary  to  encourage  inventors  by  patent  laws 
which  give  them  the  exclusive  right  to  reap  the 
benefit  of  their  brain -service  for  a  certain  time. 
Otherwise  they  could  not  afford  to  do  this  service. 
This  kind  of  profit  then  becomes  a  definite  ele- 
ment of  cost  until  the  patent  expires,  or  until  an 
equivalent  invention  again  brings  competition  into 
play.  It  does  not,  however,  add  to  price,  because, 
like  rent,  it  is  the  equivalent  of  labor  saved  ;  if  the 
invention  had  not  given  this  advantage,  people 
would  not  pay  for  it. 

It  is  by  this  fall  of  prices  and  lowering  of  prof- 
its that  competition  tends  to  drive  out  of  business 
middle -men  and  small  dealers.  Houses  whose 
closer  business  methods  and  superior  facilities — 
the  result  of  brains  —  give  them  large  sales,  can 
afford  to  make  any  one  sale  cheaper  than  small 
dealers.  This  is  a  hardship  to  the  less  able  men, 
but  the  community  gains. 

What  we  know  as  "  hard  times,"  "bad  trade," 
etc.,  seem  to  depend  upon  the  directors  of  indus- 
try as  affected  by  the  margin  of  profit.  It  has 
lately  been  pointed  out  that  the  consumption  of 
food,  the  transportation  returns  of  the  railways,  in 


THE  DIRECTION  OF  LABOR.  1 83 

short,  the  volume  of  staple  business,  arc  not  notice- 
ably less  in  "  bad"  than  in  "  good  "  years,  and  that 
capital  is  cheaper  in  the  former.  In  1885,  as 
shown  by  Commissioner  Wright's  national  labor 
report,  five  per  cent,  of  our  factories,  mines,  etc., 
were  absolutely  idle,  and  as  many  more  idle  for 
perhaps  half  the  year,  leaving  probably  a  million 
working-men  unemployed,  at  a  loss  of  $300,000,000 
in  wages,  and  much  more  than  that  in  product. 
A  "  better  feeling,"  partly  produced  by  and  partly 
producing  improved  commercial  and  industrial 
conditions,  would  open  many  of  these  shut  facto- 
ries, while  such  troubles  as  the  railroad  strikes  of 
1886  tend  to  alarm  employers  and  keep  factories 
closed.  The  panic  of  1893  compelled  the  railroad 
companies  to  lay  off  93,000  men.  Confidence  and 
courage  in  the  directing  class  seem  to  be  a  chief 
factor  in  the  prosperity  of  the  community  at  large. 


XXIII. 


THE  RELATION  OF   EMPLOYER  AND  EMPLOYED. 

If  you  try  to  account,  on  blackboard  or  paper, 
for  the  price  of  a  yard  of  cloth  made  by  a  man- 
ufacturer who  hires  land  and  water-power  and 
borrows  capital  to  build  and  stock  his  mill,  you 
will  draw,  first,  a  block  for  rent ;  then  for  interest ; 
then  for  wear  and  tear  of  "  plant " — that  is,  the 
building,  machinery,  and  tools;  then  for  the  cotton 
and  other  material ;  last,  for  labor.  You  have  cost 
now,  but  not  price.  The  market  price  would  be 
determined  quite  outside  of  this  mill — by  the  de- 
mand for  the  kind  of  cloth  made,  the  stock  in  mar- 
ket, the  number  and  product  of  competing  mills. 
If  above  cost,  it  leaves  a  block  for  profit ;  if  it 
falls  permanently  below,  the  goods  must  be  made 
cheaper,  or  the  employer  must  stop  his  works. 
Now,  the  two  great  blocks  would  be  material  and 
wages.  If  the  employer  can  get  material  cheaper, 
he  is  less  likely  to  resist  the  human  pressure  for 


RELATION  OF  EMPLOYER  AND  EMPLOYED.  185 

an  advance  of  wages;  when  he  is  between  the  up- 
per and  the  lower  millstone  of  lowering  prices  and 
higher  or  steady  material,  neither  of  which  are 
within  his  control,  his  only  resource  is  to  lessen 
the  total  wages. 

Here,  in  fact,  is  the  key  to  what  is  commonly 
called  the  conflict  between  labor  and  capital.  In 
the  distribution  of  product  the  director  of  indus- 
try, who  cannot  control  rent  or  reduce  interest, 
struggles  constantly  to  keep  down  the  pay  of  la- 
bor, so  that  the  cost,  which  he  can  thus  modify, 
shall  be  so  much  less  than  the  price,  which  is  made 
for  him,  as  to  pay  him  for  his  head-work  and  risk. 
The  man  of  brains,  the  director,  is  always  trying, 
also,  to  make  one  pair  of  hands  do  the  work  of 
two.  A  new  machine  which  does  the  work  of  ten 
men  with  only  five,  enables  the  employer,  by  re- 
ducing the  wages -cost,  to  reap  increased  profit, 
until  the  general  use  of  the  improvement  brings 
prices  down  nearer  to  the  decreased  cost.  It  is  on 
his  part  a  "  struggle  for  existence,"  for  his  profit 
is  constantly  tending  to  disappear,  as  industry  pro- 
gresses and  prices  lower.  "  Masters  want  the  great- 
est profit,  we  men  the  highest  wages,"  said  a 
leading  trade-unionist  of  England.    It  is,  therefore, 


ECONOMICS  FOR  THE  PEOPLE. 


not  true  that  the  "  antagonism  "  is  between  labor 
and  capital,  which  helps  labor  at  a  lowering  rate  of 
interest  determined  outside  the  labor  market,  or 
land,  whose  rent  represents  labor  saved ;  it  is  be- 
tween the  wage-earner  and  the  profit-earner,  the 
laborer  and  the  director  of  industry,  labor  and 
brains,  that  the  struggle  exists  by  which,  in  the 
wise  development  of  nature,  the  highest  gain  of 
both,  at  the  expense  of  temporary  loss,  is  finally 
secured.  For  out  of  this  contest  has  come  the 
motive  to  produce  those  wonders  of  labor-saving 
machinery  which,  in  multiplying  many  fold  the 
production  of  the  world,  have  given  the  humblest 
worker  "  a  better  living." 

Capital  has,  however,  often  given  to  the  director 
a  staying  power  in  this  contest  which  labor  lacked, 
and  for  a  long  time  the  laborer,  helpless  by  him- 
self, had  not  a  fair  chance  in  this  contest  with  the 
employer,  often  a  great  railroad  corporation  or 
joint-stock  company,  protected  by  favoring  legisla- 
tion, or  the  controller  of  the  aggregated  power  of 
a  great  private  fortune.  This  led  to  the  organiza- 
tion by  the  more  intelligent  working-men  of  the 
trades-unions  and  other  labor  organizations  which 
have  done  so  much  for  the  interests  of  labor.  The 


RELATION  OF  EMPLOYER  AND  EMPLOYED.    1 87 

fact  that  supply  and  demand  ultimately  regulate 
wages,  is  illustrated  by  the  rise  of  the  wages  of  do- 
mestic servants,  who  have  no  unions,  but  who  have 
profited  the  most  fully  of  any  laboring  class  by  in- 
creased demand.  Nevertheless,  the  trades-unions 
have  been  of  great  service  to  the  community  in 
enabling  labor  to  "  hold  its  own  M  in  many  ways. 
Their  effect  has  been  not  so  much  to  stop  compe- 
tition, as  is  commonly  assumed,  as  to  give  each 
side  in  the  contest  an  equal  chance.  When  organ- 
izations have  made  the  mistake  of  ignoring  the 
law  of  competition,  they  have  gone  to  pieces,  as 
did  the  Knights  of  St.  Crispin  in  Massachusetts 
some  years  since. 

In  each  city  or  centre  of  industry  in  the  United 
States  almost  every  trade  has  now  its  Union,  in 
which  most  of  the  best  workmen  are  associated. 
These  Unions  usually  join  in  a  central  organiza- 
tion for  each  trade,  or,  as  in  the  case  of  the  pow- 
erful Brotherhood  of  Locomotive  Engineers,  a 
central  organization  leads  to  local  association. 
There  are  also  in  the  large  cities  general  Assem- 
blies or  Central  Committees  of  the  Unions  of  all 
the  trades.  State  Assemblies  meet  in  several 
States,  and  a  National  Labor  Congress  has  several 


1-88         ECONOMICS  FOR  THE  PEOPLE. 

times  been  held.  The  American  Federation  of 
Labor  is  the  national  organization,  thus  organized 
by  trades.  The  Knights  of  Labor  are  another  or- 
ganization spread  all  over-the  land,  enrolling  work- 
ingmen  without  reference  to  their  trade,  but  ac- 
cepting individual  trades-unions  among  their  many 
thousand  local  bodies,  under  the  executive  direc- 
tion of  a  Grand  Master  Workman. 

The  first  result  of  labor  association  was  natu- 
rally "  strikes/'  the  combined  refusal  of  working- 
men  to  work.  This  led,  as  a  counter-move  on  the 
part  of  masters,  to  "  lock-outs/'  or  the  entire  ceas- 
ing of  employment  by  the  stoppage  of  mills.  This 
method  of  settling  labor  disputes  produced  enor- 
mous losses  on  both  sides.  It  is  a  most  costly  meth- 
od of  bettering  wages.  Even  successful  strikes  do 
not  often  pay,  because  a  strike  that  lasts  one  month 
requires  a  rise  of  ten  per  cent,  for  the  rest  of  the 
year  to  balance  the  loss  of  wages.  The  United 
States  Labor  Bureau,  for  the  13  \  years,  1881  to 
June  30,  1894,  schedules  14,389  strikes,  involving 
69,166  establishments  and  3,714,231  persons,  be- 
sides lockouts  involving  6067  establishments  and 
366,690  employes.  The  largest  number  of  both 
were  in  the  building  trades.    The  average  dura- 


RE  LA  TION  OF  EMPLOYER  AND  EMPLOYED.  1 89 

tion  of  the  strikes  was  25  days,  and  of  the  lock- 
outs 47  days.  The  strikes  involved  $163,800,000 
loss  of  wages,  an  average  of  $44  to  each  worker  (of 
which  $10,900,000  was  made  up  by  the  labor  or- 
ganization benefits),  and  $82,500,000  to  employers. 
The  lockouts  involved  $26,600,000  loss  of  wages, 
or  $73  to  each  worker  (of  which  $2,500,000  was 
made  up),  and  $12,200,000  to  employers.  Out  of 
the  strikes  in  these  69,166  establishments  21,480 
were  for  increase  and  5,564  against  decrease  of 
wages;  10,543  for  reduction  of  hours;  4,787  for  in- 
crease of  wages  and  reduction  of  hours;  3,793  sym- 
pathetic strikes  ;  8,508  for  recognition  of  unions  or 
against  non-union  men.  Of  the  strikes  44  per  cent, 
succeeded,  1 1  per  cent,  partly  succeeded,  and  44  per 
cent,  failed  ;  of  the  lockouts  40  per  cent,  succeed- 
ed fully,  9  per  cent,  partly,  and  47  per  cent,  failed. 
Success  has  usually  depended  on  the  condition  of 
the  market,  and  seems  to  have  been  more  frequent 
in  demanding  advances  than  in  resisting  reduc- 
tions. In  one  strike  certain  employers  imported 
skilled  Belgian  glass-workers,  but  found  that  their 
labor  cost  more  than  the  American,  and  it  was  as 
a  result  of  this  that  the  employers  gave  up.  In 
the  great  strike  of  the  freight-handlers,  June,  1882, 


I90  ECONOMICS  FOR  THE  PEOPLE. 

the  railway  companies  hired  immigrants  as  they 
landed,  but  found  that  it  took  four  of  them  to  do 
one  man's  work. 

The  limits  of  a  strike  are  (1)  the  rights  of  indi- 
viduals, (2)  the  possibilities  before  the  employer, 
(3)  the  public  interest  and  public  opinion.  A  strike 
which  relies  upon  compelling  any  other  men  to 
cease  work  should  fail,  and  usually  does  fail.  That 
is  a  crime  against  "  the  right  to  labor."  A  strike 
which  demands  from  the  employer  more  money 
than  the  conditions  of  the  market  warrant,  or  than 
the  price  he  gets  for  his  goods  permits,  or  which 
takes  from  him  the  direction  of  his  own  busi- 
ness, is  sure  to  result  ill.  Such  strikes  drive  em- 
ployers out  of  business  and  prevent  others  from 
coming  in.  A  strike  which  sets  itself  against  the 
public  interest,  by  stopping  railway  trains  and  so 
blocking  business  at  large,  meets  a  public  senti- 
ment which  soon  overwhelms  it.  Public  opinion 
is,  after  all,  the  great  arbiter,  and  is  almost  sure  to 
uphold  just  strikes,  but  to  defeat  strikes  when  un- 
just. 

The  "  boycott "  is  a  development  from  the  strike, 
wThich  consists  in  refusing  to  purchase  from  or  hold 
other  relations  with  the  person  "  boycotted/'  It 


RELATION  OF  EMPLOYER  AND  EMPLOYED.  191 

took  its  name  from  a  Captain  Boycott,  a  landlord 
in  Ireland,  who  was  thus  treated  in  1880.  The 
great  evils  of  both  the  strike  and  the  boycott,  in 
the  proportions  they  have  lately  reached,  arc  the 
lack  of  responsibility  with  which  they  are  used, 
and  the  inadequacy  of  the  original  wrong  to  justi- 
fy the  stoppage  of  production  and  the  great  loss  of 
thousands  of  other  working-men,  which  they  now 
involve.  The  great  Western  railway  strike  of 
1886  originated  in  an  attempt  to  punish  a 
bankrupt  road  for  its  action  towards  one  man, 
and  the  Chicago  riots  and  blockade  of  1894 
in  an  attempt  to  boycott  the  Pullman  Com- 
pany ;  but  their  spread  blocked  business  at  large, 
deprived  factories  of  their  necessary  material,  and 
so  stopped  the  wages  of  thousands  of  absolutely 
innocent  people.  The  Milwaukee  boycott  against 
the  street-car  lines  in  1895-6  was  extended  to  all 
who  patronized  those  lines,  and  nearly  paralyzed 
business  in  all  branches  throughout  the  city. 

Arbitration,  on  the  contrary,  has  proved  the 
successful  method  of  settlement  for  labor  differ- 
ences. In  France,  under  a  law  of  Napoleon  I., 
this  method  is  provided  by  law.  Over  a  hundred 
Conseils  des  Prud' hommes  exist  in  different  cen- 


I92  ECONOMICS  FOR  THE  PEOPLE. 

tres,  made  up  of  an  equal  number  of  employers 
and  working-men,  elected  each  by  its  own  class 
under  the  auspices  of  the  Government  prefect, 
with  a  president  and  vice-president  appointed  by 
the  Government.  A  bureau  particulier,  of  one  em- 
ployer and  one  working-man,  sits  every  day,  and 
before  this  disputes  must  first  be  brought.  If  an 
agreement  is  not  here  reached,  the  case  goes  to 
the  bureau  ge'ne'ral,  of  at  least  five  members,  sitting 
once  a  week,  and  its  decisions  are  enforced  as  a 
court  of  law.  Over  35,000  cases  a  year  have  come 
before  these  Conseils,  of  which  (in  1878)  10,000 
were  withdrawn,  18,000  adjusted  by  the  bureau 
particulier,  7000  carried  on  to  the  bureau  ge'neral, 
of  which  it  obtained  the  withdrawal  of  4400  and 
adjusted  over  2200,  only  100  being  appealed  to 
the  Tribunals  of  Commerce.  Laws  providing  meth- 
ods of  arbitration  exist  in  England  and  in  some  of 
our  own  States,  but  in  these  countries  voluntary 
has  taken  the  place  of  legal  arbitration.  A  Penn- 
sylvania law  authorizes  judges  of  Common  Pleas, 
on  tlie  petition  of  not  less  than  fifty  workmen  and 
five  employers,  naming  at  least  two  representatives 
on  each  side  and  an  umpire  mutually  chosen,  to 
license  a  trade  tribunal  with  legal  powers.  A 


RELATION  OF  EMPLOYER  AND  EMPLOYED.  Xg3 

court  of  arbitration  was  provided  by  State  law  in 
New  York  City,  with  ex-Judge  Fancher  as  arbi- 
trator, for  the  direct  settlement  of  commercial  dis- 
putes voluntarily  brought  before  it,  but  this  soon 
began  to  take  the  character  of  a  regular  court, 
with  lawyers  on  cither  side. 

Voluntary  arbitration  has  been  most  successful 
in  the  Nottingham  hosiery  trade,  where  the  first 
systematic  board  was  established  in  i860,  since 
which  time  there  has  not  been  a  strike;  in  the 
manufactured  iron  trade  and  in  the  Durham  coal 
trade,  in  England,  and  in  the  Pittsburgh  iron  trade, 
since  1865,  in  America.  Where  there  is  only  a 
consultation  between  two  sides,  with  no  provision 
for  enforced  agreement,  the  method  is  properly 
called  conciliation  rather  than  arbitration  ;  where 
a  third  party  is  called  in  as  arbitrator,  whose  de- 
cision is  to  be  accepted  or  enforced,  it  is  arbitration 
proper.  The  English  iron  trade  presents,  perhaps, 
the  best  model :  the  board  is  composed  of  one  rep- 
resentative from  the  employers  and  one  of  the 
employes  from  each  works  joining.  A  standing 
committee,  meeting  at  need,  first  hears  differences 
and  attempts  conciliation ;  if  no  agreement  is 
reached,  the  case  is  heard  by  the  board,  which 
13 


194  ECONOMICS  FOR  THE  PEOPLE, 

meets  regularly  twice  a  year,  or  more  often  if  nec- 
essary, and  calls  in  an  umpire  or  arbitrator  if  the 
board  does  not  agree.  The  board  is  fully  informed 
as  to  the  conditions  of  trade,  the  manufacturers 
permitting  sworn  accountants  to  examine  their 
books  in  its  behalf.  At  a  semi-annual  cost  of  about 
$3000  this  board  has  altogether  prevented  difficul- 
ties, which  is  the  peculiar  usefulness  of  stated  meet- 
ings, and  saved  at  least  a  hundred  times  its  cost. 
The  Durham  coal  arbitration  board  met  at  regular 
intervals,  and  peacefully  adjusted  a  sliding-scale 
of  wages  based  on  the  price  of  coal  at  the  pit's 
mouth,  which  system  prevented  strikes  until  189 1. 
The  Pittsburgh  system,  in  this  country,  has  so 
far  been  an  imperfect  one,  making  yearly  agree- 
ments which  have  not  altogether  prevented  strikes, 
but  it  is  a  step  forward  in  a  method  peculiarly  ap- 
plicable to  American  industrial  conditions. 

This  modern  method  of  the  settlement  of  labor 
differences  recognizes  a  human  relation  between 
intelligent  labor  and  intelligent  direction,  based, 
however,  on  those  laws  of  Economics  which  show 
that  labor,  as  a  commodity,  is  subject  to  the  lim- 
itations of  the  market.  The  employer,  in  this 
case,  is  willing  to  lay  before  the  employes  the 


RELATION  OF  EMPLOYER  AND  EMPLOYED.   1 95 

facts  on  which  his  calculations  are  based,  and  the 
employes,  in  turn,  must  refrain  from  any  interfer- 
ence with  the  full  direction  of  his  business,  which 
the  employer  must  retain.  The  mistakes  of  labor 
organizations  have  been  twofold,  in  endeavoring 
to  compel  employers  to  surrender  the  control  of 
their  own  business,  and  in  attempting  to  restrict 
other  men's  labor  by  persecuting  individual  labor- 
ers as  "rats"  and  "scabs,"  by  refusing  to  work 
with  non- Union  men,  by  limiting  the  number  of 
apprentices,  and,  worst  of  all,  by  violence  against 
law.  This  is  a  combination  of  the  strong  against 
the  weak,  traitorous  and  ruinous  to  the  true  inter- 
ests of  labor,  which  public  opinion  sooner  or  later 
defeats.  It  is  repeating  the  wrongs  against  labor 
which  labor  associations  were  organized  to  right ; 
and,  by  decreasing  product,  it  wreaks  its  own  pun- 
ishment upon  the  industrial  community.  Break- 
ing machines,  restricting  apprenticeship,  shutting 
out  the  immigration  of  "  cheap  labor,"  are  all  meas- 
ures of  restriction  which,  like  usury-laws,  offer  a 
seeming  and  temporary  relief  at  the  final  expense 
of  those  who  look  to  them  for  benefit.  The  use- 
fulness of  labor  associations  is  not  in  breaking 
down  the  industrial  organization,  but  in  enabling 


I96  ECONOMICS  FOR  THE  PEOPLE. 

labor  to  "  hold  its  own  "  in  this  contest,  through 
arbitration  or  other  peaceful  means,  by  the  self- 
same help  of  capital,  massed  through  the  petty 
savings  for  mutual  aid.  When,  in  the  course  of 
development  by  competition,  corporations  or  indi- 
vidual directors  abuse  their  power,  and  seek  to 
defy  natural  rights,  to  control  courts  or  to  domi- 
nate Legislatures,  sooner  or  later  public  opinion 
and  the  power  of  the  whole  people  show  them- 
selves mightier  than  they.  The  key  to  "  the  labor 
conflict,"  therefore,  is  in  wise  steadfastness  of  gen- 
eral trade  organization,  putting  aside  the  dema- 
gogic promoters  of  "  labor  parties,"  promoting 
pure  politics  and  alert  public  opinion,  and  appeal- 
ing with  confidence,  when  need  comes,  to  "  the 
people,"  of  which  " laborers"  themselves  form  the 
vast  majority. 


XXIV. 


OF  CO-OPERATION. 

Co-OPERATION,  as  opposed  to  competition,  is, 
properly  speaking,  an  association  of  Labor  to  se- 
cure profits  as  well  as  wages.  It  is  not,  as  com- 
monly stated,  a  method  of  doing  without  capital, 
for  a  co-operative  association  usually  begins  by 
getting  capital  in  small  sums  from  its  members,  or 
by  borrowing  capital  at  the  normal  rate  of  inter- 
est. Co-operation  may  either  set  itself  to  the 
work  of  supply,  dividing  the  profits  of  ordinary 
shops,  or  to  that  of  production,  dividing  the  prof- 
its of  manufactories  and  other  producing  organi- 
zations. 

Co-operation  in  supply,  sometimes  called  distrib- 
utive co-operation,  has  been  most  successful  in 
Great  Britain,  where,  starting  from  the  28  Roch- 
dale Pioneers  of  1844,  with  their  capital  of  £28, 
there  were  in  1 891  1459  retail  co-operative  societies, 


I98  ECONOMICS  FOR   THE  PEOPLE. 

with  1,098,000  members,  $55,000,000  share-capital, 
and  $157,500,000  annual  sales,  mostly  combined 
into  a  Co-operative  Union,  and  supporting  two 
great  federated  wholesale  societies,  whence  they 
buy  about  $60,000,000  of  their  goods.  There  were 
also  100  manufacturing  or  productive  societies, 
producing  $12,500,000  yearly,  and  several  feder- 
ated corn-mills.  A  co-operative  insurance  com- 
pany, a  banking-house,  the  Co-operative  News,  and 
an  annual  congress  are  features  of  this  system. 

Under  the  English  system  of  distributive  socie- . 
ties  or  stores,  (1)  any  one  can  become  a  member 
on  deposit  of  is.  3d.  (30  cents)  per  share,  for  one 
or  more  shares.  Sales  are  always  (2)  at  ordinary 
market-prices  (3)  for  cash.  Stamped  tokens  are 
given  to  each  member  showing  the  amount  of  his 
purchase,  which,  at  the  end  of  the  quarter,  entitle 
him  (4)  to  a  pro  rata  share  of  dividends  from  prof- 
its. Out  of  these  dividends  3d.  (6  cents)  a  week 
for  each  share  is  retained  by  the  society,  to  form 
the  working  capital,  until  (5)  the  ,£1  ($5)  share  is 
paid  up,  after  which  members  can  withdraw  all 
their  dividends  or  let  them  stay  as  capital,  in  which 
case  5  per  cent,  interest  is  paid.  At  the  meetings 
each  member  has  (6)  one  vote  without  regard  to 


OF  CO-OPERATION.  199 

his  number  of  shares.  Women  are  members,  and 
there  is  a  general  Women's  Guild  or  league  for 
the  spread  of  co-operation.  The  general  meeting 
elects  the  Committee,  whose  members  are  some- 
times paid  fees  for  each  attendance.  The  com- 
mittees "  find  it  worth  while  to  pay  well  M  for  good 
store-keepers  and  employes,  as  societies,  "  at  the 
saving  of  a  few  shillings  or  pounds  yearly,  which 
makes  the  difference  between  a  good  and  an  indif- 
ferent man,  have  lost  hundreds  of  pounds,  or  even 
been  mined."  This  is  the  strongest  possible  evi- 
dence that  it  pays  Labor  to  pay  for  Brains  or  di- 
rection. These  stores  usually  reckon  on  a  profit 
of  from  \2\  to  30  per  cent,  on  different  classes  of 
goods,  and  on  5  to  *]\  per  cent,  working  expenses. 
In  30  years  they  have  done  about  §2,750,000,000 
of  business,  dividing  $250,000,000  profits,  averag- 
ing on  capital  employed  about  30  per  cent,  and  on 
sales  about  9  per  cent.  Working-men's  clubs, 
social  gatherings,  and  entertainments  are  often 
associated  with  the  stores.  Sixty  societies  have 
building  departments,  aside  from  the  hundreds  of 
building  societies  proper.  The  great  "  stores  "  in 
London,  such  as  the  "  Civil  Service  Supply  Asso- 
ciation," the  "  Army  and  Navy,"  etc.,  whose  enor- 


200 


ECONOMICS  FOR  THE  PEOPLE, 


mous  quarterly  sales-catalogues  are  the  best  auh 
thority  for  English  prices,  are  rather  joint-stock 
companies  than  true  co-operative  associations. 
The  bitter  complaint  of  private  shopkeepers  in 
England  against  the  co-operative  stores  for  "  tak- 
ing the  profits  out  of  business "  shows  how  im- 
possible it  is  to  put  any  social  improvement  into 
operation  without  some  detriment  and  much  op- 
position. 

On  the  other  hand,  productive  co-operation  has 
not  been  notably  successful  in  England.  The 
greatest  success  has  been  in  France,  in  M.  Godin's 
Familistere  (or  family-house)  at  Guise.  This  great 
man,  in  establishing  his  iron-works  at  that  place, 
induced  his  workmen  to  contribute  regularly  to  a 
mutual  insurance  fund,  to  which  the  works  made 
an  annual  donation.  About  i860  he  began  the 
Social  Palace,  now  holding  over  five  hundred  fami- 
lies. As  the  fund  grew,  M.  Godin  offered  to  asso- 
ciate its  owners  with  him  as  partners,  but  it  was 
not  until  1880  that  he  got  his  Mutnalite  Sociale 
into  final  business  shape  as  "  Godin  &  Co."  Its 
principle  is  that  "  every  producing  element  should 
participate  in  the  profits,  in  proportion  to  the  serv- 
ices it  has  rendered."    These  are  stated  as  (1)  "  the 


OF  CO-OPERATION.  201 

earth  and  natural  resources"  (rent  and  cost  of  ma- 
terial); (2)  "the  actual  labor  of  individuals"  (wages 
at  a  settled  schedule,  the  day's  work  being  ten 
hours);  (3)  "  capital,  or  labor  economized,  the  pas- 
sive agent"  (interest).  The  amount  paid  to  labor 
as  wages  proves  to  be  eight  times  that  paid  to 
capital  as  interest.  Finally  the  (4)  directing  and 
administrative  force  is  paid  25  per  cent,  of  the 
profits  (the  Director,  or  "  Acting  Administrator," 
M.  Godin  himself,  getting  half  of  this),  the  other 
75  per  cent,  going  to  the  workers,  viz.,  (a)  68  as- 
sociates, counting  for  twice  their  wages  in  the 
allotment;  (£)95  societaries,  once  and  a  half  their 
wages;  (c)  573  participants,  once  their  wages.  The 
{d)  auxiliaries,  158,  have  a  claim  only  on  the  mutual 
insurance;  and  (e)  258  "interested"  have  certain 
claims  on  the  capital.  The  associates  choose  a 
Council  of  Administration  (which  is  a  final  arbiter 
as  to  individual  wages),  a  Council  of  Industry,  and 
a  Council  of  the  Familistere  ;  the  general  assembly 
chooses  a  Council  of  Observation.  M.  Godin  is 
Acting  Administrator  for  life,  and  chooses  the 
heads  of  departments,  after  a  written  and  oral 
examination  ;  his  successor,  to  be  elected  by  the 
associates,  will  also  be  for  life,  but  subject  to  sus- 


202  ECONOMICS  FOR  THE  PEOPLE. 

pension  by  the  General  Assembly.  M.  Godin,  the 
associates,  and  the  societaries  all  live  in  the  Social 
Palace.  The  workers  soon  owned  about  $400,000 
of  the  social  capital,  and  will  ultimately  own  the 
whole  $1,320,000.  In  one  five-year  period  the  re- 
turns were  over  $1,000,000,  of  which  $267,000  has 
gone  to  M.  Godin  ($66,000  as  Director,  $201,000  at 
5  and  6  per  cent,  for  his  capital),  and  $756,000  to 
the  workers.  There  are  reserve  funds  for  (1)  the 
assurance  of  necessities  to  support  life — "the  con- 
secration of  the  right  to  life  " — and  a  provision  for 
old  age  ;  for  (2)  sickness  expenses  ;  for  (3)  medical 
care. 

From  these  two  great  examples  of  English 
distributive  co  -  operation  and  French  productive 
co-operation  may  be  learned  the  usual  cause  of 
failure  and  the  key  to  success  in  working-men's 
co-operation.  It  must  recognize  differences,  and 
it  must  pay  for  brains. 

It  is  not  within  economic  possibilities  that  the 
different  qualities  of  labor  and  brains  entering  into 
the  combination  shall  be  paid  at  the  same  rate. 
The  modern  industrial  organization  demands  a  di- 
rectorship, usually  by  one  authoritative  person,  of 
an  ability  which  commands  a  considerable  return 


OF  CU  OPERATION.  203 

of  profits  or  an  equivalent  commutation  of  them 
into  salary.  Most  associations  of  labor  have  been 
unwilling  to  accept  this  necessity  of  leadership  or 
to  pay  for  it,  and  they  have  consequently  been 
unable  to  stem  the  keen  competition  which  only 
brains  can  meet.  The  trades -unions  themselves 
have  too  generally  fostered  the  mistake  so  care- 
fully avoided  by  M.  Godin,  in  providing  that  all 
qualities  of  labor  shall  be  paid  for  at  the  same 
day-rate. 

The  system  of  M.  Godin  is,  in  fact,  what  is  more 
accurately  known  as  Industrial  PartncrsJiip,  in 
which  employers  retain  the  direction,  but  give  to 
employes  a  share  of  profits  in  place  of  or  in  ad- 
dition to  wages.    The  most  noteworthy  applica- 
tion of  this  method  to  ordinary  trade  conditions 
is  the  case  of  M.  Leclaire's  house -painting  es- 
tablishment in  Paris.    The  200  employes,  formed 
into  a  provident  society,  constituted  one  of  three 
partners  in  the  concern.   M.  Leclaire  and  his  other 
partner  retained  $1200  each  as  salary  and  one-half 
the  net  profits.    The  other  half  went,  two -fifths 
to  the  provident  society,  three -fifths  to  individ- 
ual workmen,  distributed,  however,  according  to 
M.  Leclaire's  direction.    M.  Leclaire  found  this 


204  ECONOMICS  FOR  THE  PEOPLE. 

method  distinctly  profitable  to  him.  A  similar 
plan  has  been  attempted  in  America,  but  a  serious 
blow  was  given  to  its  development  when,  in  a 
general  strike,  the  employes  of  Brewster  &  Co„, 
the  leading  carriage  manufacturers  of  New  York, 
who  had  adopted  this  system,  left  work  with  the 
rest.  Co-operation  can  succeed  only  when  it  is 
real — when  each  side  works  tvith  the  other.  Not 
only  Capital  but  Labor  also  must  learn  to  respect 
rights. 

Co-operative  banking,  by  mutual  loan  associations, 
is  now  common  in  all  civilized  countries.  The 
most  famous  societies  are  the  Credit-unions  or  peo- 
ple's banks  of  Germany,  founded  by  Dr.  Schulze- 
Delitzsch  in  1850,  which  differ  from  our  savings- 
banks  chiefly  in  requiring  regular  small  deposits, 
under  penalty  of  a  fine,  and  in  loaning  this  capital 
only  to  depositors.  The  Co-operative  Building  and 
Loan  Associations  existing  in  Pennsylvania  and 
other  States  are  on  this  model,  loaning  the  depos- 
its for  the  building  of  houses  to  those  share-hold- 
ers bidding  the  highest  premium  for  the  use  of 
the  money.  There  are  several  thousands  of  these 
in  this  country.  Our  savings-banks,  having  in 
1895    4,777,000   depositors   and   about  $1,850,- 


OF  CO-OPERATION.  20$ 

000.000  deposits,  and  our  mutual  insurance  com- 
panies, are  also  really  co-operative  banking  asso- 
ciations. Another  form  of  co-operation  is  the 
joint-stock  companies,  in  which  a  number  of  peo- 
ple put  their  savings  together  by  buying  shares, 
and  divide  the  profits,  after  paying  expenses  of 
management,  in  the  shape  of  dividends ;  these 
constitute,  in  fact,  the  largest  co-operative  inter- 
est in  our  own  and  other  countries. 

The  system  of  co-operative  stores,  so  successful 
in  England,  has  not  made  much  headway  in  Amer- 
ica, though  a  few  have  been  carried  on  by  the 
Knights  of  St.  Crispin  and  other  labor  associations. 
The  reason  is  probably  simple.  Competition,  it 
has  been  said,  is  the  best  co-operation.  The  eager 
competition  in  America,  combined  with  our  cash 
system,  has  given  us  in  lowered  prices  the  benefits 
which  the  English  co-operators  get  as  dividends. 
But,  with  our  educated  labor,  there  seems  to  be  no 
reason  why  co-operative  production,  rightly  organ- 
ized, should  not  attain  enormous  proportions  in 
this  country.  A  Co-operative  Iron  Foundery  was 
established  at  Troy,  N.  Y.,  in  1866  ;  there  has  been 
a  successful  Co-operative  Printing-office  in  New 
York  City ;  but  the  number  of  such  enterprises 


206  ECONOMICS  FOR  THE  PEOPLE. 

is  yet  small.  Certain  socialistic  or  communistic 
societies,  like  the  Mormons,  the  Shakers,  and  the 
Oneida  Community,  have  been  large  co-operative 
producers. 


XXV. 

SOCIALISM  AND  COMMUNISM. 

SOCIALISM  means  an  industrial  organization  in 
which  society,  or  the  State,  takes  a  controlling  in- 
terest, and  the  individual,  surrendering  more  or 
less  his  personal  relations,  looks  to  the  general  or- 
ganization for  direction  and  employment.  The 
word  was  first  used  by  Ruybaud  in  1840,  but  this 
method  for  a  more  just  distribution  of  wealth  and 
for  promoting  the  happiness  of  all  is  as  old  as 
Plato's  "  Republic."  Communism  is  an  extreme 
of  socialism,  aiming  at  economic  equality  or  com- 
munity of  goods,  so  that  all  social  differences  shall 
disappear  and  "  one  man  be  as  good  as  another." 
Anarchism,  or  Nihilism,  though  it  develops  from 
communism,  becomes  the  opposite  of  socialism  ; 
it  desires  "  unlimited  liberty,"  providing  that  ev- 
ery human  being  should  do  as  he  pleases,  and  only 
as  he  pleases,  under  free  contract,  perpetually  re- 
visable  and  dissoluble,  and  it  proposes  the  destruc- 


208  ECONOMICS  FOR  THE  PEOPLE. 


tion  of  all  present  governments,  of  which  "  the 
best  are  the  worst/'  and  a  riotous  grab  for  existing 
wealth. 

Communism  and  anarchism  are  the  development 
of  a  society  in  which  the  very  rich  confront  the 
very  poor,  in  which  an  extreme  division  of  labor 
renders  workers  very  dependent  on  the  industrial 
organization,  in  which  a  loose  political  morality  is 
fostered  by  corrupt  political  parties,  in  which  there 
is  the  false  notion  that  democracy  implies  entire 
equality,  and  in  which  there  is  a  general  decay  of 
personal  morality  or  religion.  Under  these  condi- 
tions a  democracy  like  our  own  becomes  the  hot- 
bed of  communism,  and  the  care  of  statesmen  must 
be  to  prevent  these  conditions. 

The  French  Revolution,  loosening  the  bonds  of 
society,  opened  the  way  in  France  for  the  devel- 
opment of  the  materialistic  communism  of  Ba- 
boeuf,  the  sentimental  communism  of  Cabet,  whose 
"  Icarian  "  colony  settled  Nauvoo,  Illinois,  after  the 
Mormons  left  it ;  the  "  new  Christianity  "  of  Saint 
Simon  and  the  positivist  scheme  of  his  disciple 
Comte  ;  the  socialism  of  Fourier,  with  its  division 
into  working  "  phalanxes  "  of  1500  or  1600  men; 
the  industrial  socialism  of  Louis  Blanc,  with  its 


SOCIALISM  AND  COMMUNISM,  209 

"  right  to  labor"  and  "social  workshops;"  and 
the  "mutualism  "  of  Proudhon,  who  declared  that 
"property  is  robbery,"  but  upheld  individual  pos- 
session of  the  means  of  labor,  such  as  land  and 
tools.  These  French  schemes,  however,  all  came 
to  naught. 

In  Germany;  on  the  contrary,  socialism  has  had 
direct  influence  in  the  conduct  of  affairs.  The 
"Social  Democracy,"  of  which  Rodbertus  was  the 
philosophical  founder,  and  whose  Bible  is  the 
"Capital"  of  Karl  Marx,  furnished  the  principles 
of  the  International  Working-men's  Association, 
which  held  its  first  meeting  in  London  in  1864, 
and  proclaimed  the  oneness  of  the  interests  of  la- 
bor in  all  countries.  The  anarchic  "  International  " 
branched  off  from  this  in  1872,  rejecting  the  lead- 
ership of  Marx,  and  has  since  become  an  organ- 
ized threat  to  all  governments.  Marx's  central 
idea  was  that  capital  hired  labor  at  its  value-in-ex- 
change, or  market-price  as  a  commodity,  and  got 
from  it  in  product  its  value-in-use,  pocketing  the 
difference  as  profit.  He  would  reduce  all  values 
to  a  common  unit  of  average  labor-time,  and  re- 
quire that  each  man  should  get  the  entire  value 
of  his  own  labor. 

14 


2IO  ECONOMICS  FOR  THE  PEOPLE. 

Lasalle,  the  central  figure  of  German  socialism, 
became  the  propagandist  of  this  doctrine  among 
working-men,  urging  the  abolition  of  wages  under 
a  system  of  productive  co-operation  like  Louis 
Blanc's,  for  which  the  Government  should  furnish 
capital  by  a  loan  of  $75,000,000.  He  started,  in 
1863,  the  "  Universal  German  Laborers'  Union," 
and  from  this  grew  the  Social  Democratic  political 
party,  which  has  now  several  representatives  in 
the  German  Reichstag  or  Parliament.  It  demands 
that  the  State  shall  exist  for  the  laborers,  land  and 
capital  becoming  collective  property,  and  produc- 
tion being  carried  on  co-operatively.  Many  of  the 
details  of  its  programme  were  so  practically  bene- 
ficial, however,  that  it  gained  much  hold  among 
the  people,  until  Bismarck,  endeavoring,  on  the 
one  hand,  to  repress  it  by  his  socialist  laws,  strove 
to  meet  it  on  the  other  by  such  plans  as  his  State 
insurance  for  laborers.  This  requires  a  certain 
part  of  wages  to  be  put  aside  as  insurance  moneys 
for  laborers  hurt  or  killed  at  their  work,  to  which 
a  certain  sum  is  added  by  Government,  which  con- 
trols the  insurance  organization.  The  system  is 
the  same  as  that  of  the  Baltimore  and  Ohio  Rail- 
road Company  in  this  country. 


SOCIALISM  AND  COMMUNISM. 


211 


In  addition  to  the  Social  Democrats,  there  are  in 
Germany  the  Professorial  Socialists,  or  Socialists  of 
the  Chair,  a  number  of  professors  of  political  econ- 
omy, whose  leader,  Wagner,  is  the  economic  coun- 
sellor of  Bismarck,  and  who  uphold  State  action  in 
behalf  of  laborers  by  means  of  a  strongly  paternal 
government ;  and  the  Christian  Socialists,  in  the 
Catholic  Church  led  by  Bishop  Baron  von  Kette- 
ler,  and  in  the  Protestant  Church  by  pastors  Todt 
and  Stocker,  who  look  upon  religion  as  the  motive, 
and  the  guardianship  of  the  Church  as  the  method, 
of  the  common  betterment.  The  Christian  Social- 
ists were  represented  also  in  France  by  the  eloquent 
De  Lamennais,  and  in  England  by  the  group  in- 
cluding Kingsley,  Maurice,  and  Hughes,  who  had 
shown  their  practical  helpfulness  by  an  attempt 
at  co-operative  societies  about  1850,  which  were 
afterwards  merged  in  the  system  started  later  by 
the  Rochdale  pioneers. 

Socialism  in  America  has  taken  definite  shape 
chiefly  in  the  communities  springing  from  a  relig- 
ious or  philanthropic  germ.  The  Mormon  state 
is  essentially  socialistic,  and  the  villages  of  the 
Shakers,  at  Lebanon,  New  York,  and  elsewhere, 
are  communistic,  requiring  a  surrender  of  personal 


212  ECONOMICS  FOR  THE  PEOPLE. 


property  on  the  part  of  all  joining  the  sect.  There 
has  been  much  socialistic  and  communistic  agita- 
tion in  the  great  cities,  where  dangerous  seed  has 
been  sown  among  the  working-men's  associations 
by  demagogues,  but  for  the  most  part  our  free 
democracy  has  declined  to  accept  communistic 
principles. 

There  is,  however,  a  considerable  development 
of  the  socialistic  method  in  the  adoption  by  mod- 
ern governments  of  the  business  of  the  post-office, 
telegraphs,  and  railways,  in  most  cases  as  a  mo- 
nopoly forbidding  rivalry  by  private  enterprise. 
All  civilized  countries  treat  the  post-office  as  Gov- 
ernment business,  and  this  has  developed,  indeed, 
in  the  International  Postal  Union,  into  an  interna- 
tional organization.  To  this  Great  Britain  adds  the 
telegraph  system,  and  Germany  and  other  Euro- 
pean countries  the  entire  or  partial  ownership  and 
control  of  railways.  Germany  proposes  now,  also, 
to  make  the  manufacture  of  spirits  as  well  as 
of  tobacco  a  Government  monopoly,  though  this 
is  only  as  a  means  of  revenue.  City  govern- 
ment, involving  the  supply  of  water,  and  in  some 
cases  gas,  also  involves  the  socialistic  method. 
The  extreme  laissez  faire  doctrine  as  to  Govern- 


SOCIALISM  AND  COMMUNISM.  213 

mcnt  functions  has  been  practically  modified  into 
the  dictum  that  Government  should  not  undertake 
what  can  be  as  well  done  by  private  enterprise, 
and  this  test  is  accepted  by  most  economists.  This 
is  a  question  of  practice,  limiting  the  application 
of  socialist  method  by  the  facts  of  the  individual 
case.  Government,  taking  capital  from  the  people 
by  means  of  taxes,  must  make  sure  that  these 
are  used  profitably  for  all. 

But  this  adoption  of  socialistic  or  co-operative 
method  by  Government  does  not  imply  acceptance 
of  the  socialistic  principle  that  each  man  has  the 
right  to  look  to  the  State  for  his  means  of  liveli- 
hood. The  distinction  is  vital,  for  this  theory  is 
destructive  of  the  individual  responsibility  on 
which  alone  a  free  democracy  can  be  based.  So- 
cialism, in  this  sense,  would  be  indeed  a  new 
slavery,  reducing  "each  of  us"  to  be  the  subject 
of  "  all  of  us,"  a  sovereign  master  indefinite  and 
irresponsible,  under  whose  reign  of  terror  our 
Government  would  fall  as  Rome  fell  and  as  France 
fell. 


XXVI. 

TAXATION  AND  NATIONAL  DEBT. 

It  has  been  said  that  there  are  two  things  cer- 
tain—  death  and  taxes.  Taxes  are  that  part  of 
the  wealth  of  each  citizen  taken  by  Government  to 
be  used  for  the  benefit  of  all.  Government,  like  all 
other  service,  costs  money.  This  money  comes 
out  of  the  pockets  of  the  people  :  there  is  no  other 
place  to  get  it.  It  may  come  by  direct  taxation, 
in  which  each  citizen  pays  so  much  directly  to  the 
tax-collector;  or  by  indirect  taxation,  such  as  a 
tax  on  goods  bought  and  sold,  in  which  the  tax  is 
added  to  the  price  and  is  finally  paid  by  the  man 
who  finally  uses  the  goods.  Some  one  has  called 
these  the  "  straight"  and  "  crooked"  methods  of 
taxation.  In  either  case  the  money  comes  from 
the  earnings  or  savings,  the  product  or  property, 
of  the  citizens ;  each  man  has  less  than  he  would 
have  had  if  he  had  not  paid  the  tax  or  the  in- 
creased price. 


TAXATION  AND  NATIONAL  DEBT.         21  5 

Unless  a  Government  has  public  lands  or  other 
property  to  sell  or  rent,  or  unless  it  takes  away 
business  from  its  own  citizens  by  competing  with 
them  or  monopolizing  certain  kinds  of  business, 
taxes  are  the  only  means  of  support  for  a  Govern- 
ment. For  if  it  spends  more  than  it  gets,  and  runs 
into  debt  by  issuing  promises-to-pay  called  bonds, 
sooner  or  later  this  discounting  the  future  must  be 
paid  in  higher  taxes,  unless  by  " repudiating"  its 
bonds  it  cheats  those  who  have  advanced  it  money. 
Taxes  are  thus  "the  life-blood  of  a  nation;"  and 
as  self-preservation  is  the  first  law  of  life,  Govern- 
ment has  the  right  to  take  all  the  wealth  of  all  its 
citizens,  if  that  be  necessary.  Practically,  too  high 
taxes  lead  people  to  revolt,  as  in  our  Revolution, 
or  to  dodge,  as  when  many  rich  men  moved  from 
Boston  to  Nahant,  or  to  cheat,  as  when  the  United 
States  found  that  it  got  more  money  from  a  50 
cent  tax  per  gallon  on  whiskey  than  from  a  $2  tax. 

Taxes  used  to  be  paid  in  kind — one  sheep  out 
of  ten>  To  this  day  a  countryman  can  pay  his 
road-tax  by  so  many  days'  labor  on  the  roads,  or 
(it  is  said)  a  merchant  the  50  per  cent,  duty  on  silk 
by  giving  up  one  yard  for  every  two  he  keeps. 
But,  for  the  most  part,  taxes  are  "  assessed  "  as  so 


2l6  ECONOMICS  FOR  THE  PEOPLE. 

much  percentage  on  a  money  "  valuation  "  of  prop- 
erty; taxation,  from  the  Latin  taxare,  to  value, 
means,  indeed,  a  valuing  or  counting.  After  the 
legislature  or  the  town -meeting  has  fixed  the 
amount  to  be  raised,  assessors  or  appraisers,  ap- 
pointed by  the  authorities,  fix  this  valuation,  or 
"  doom  "  the  property.  In  Boston  they  meet  in 
what  is  called  the  "  dooming  chamber,"  and  the 
famous  Domesday  Book  was  the  first  tax-roll  and 
census  of  England.  This  valuation  is  sometimes 
the  "fair  market  value"  of  property,  which  is  the 
rule  at  the  custom-house  and  in  some  States  and 
cities ;  sometimes  a  half  or  a  third  of  this,  as  in 
other  States  and  cities.  The  mere  rate  of  taxation 
thus  means  little :  2  per  cent,  on  a  valuation  of  a 
third  is  a  lower  tax  and  brings  less  money  than 
I  per  cent,  on  a  full  valuation. 

In  fact,  a  tax  is  not  good  or  bad  simply  as 
the  rate  is  low  or  high,  but  according  to  how 
the  money  is  raised  or  used.  The  productive- 
ness of  a  tax  is  not  its  first  consideration.  A 
heavy  tax  may  be  far  less  injurious  to  a  country 
than  the  blight  which  may  result  from  the  manner 
of  taxing  it  —  a  blight  which  ruins  the  harvest 
which  it  cannot  gather.    Good  government  is  the 


TAXATION  AND  NATIONAL  DEBT.  217 

best  of  investments ;  bad  public  service  is  the  worst 
of  waste.  A  community  of  high  civilization  pays 
large  taxes,  and  profits  by  them  ;  poor  communi- 
ties starve  without  them.  In  most  cities  the  high- 
est tax  paid  is  the  charge  for  water,  but  a  citizen 
who  pays  $10  a  year  saves  much  more  in  the  avoid- 
ance of  the  cost  of  keeping  his  well  clean,  of  buck- 
ets, and  of  labor  in  fetching  and  carrying.  A  good 
sewerage  system  is  costly,  but  it  saves  a  great  deal 
besides  doctors'  bills.  Good  roads  and  streets  save 
more  than  their  cost  in  time,  wagons,  and  horse- 
flesh. But  a  tax  must  justify  itself  by  its  increase 
of  product,  through  greater  safety,  comfort,  or  fa- 
cility. It  must  give  more  than  it  takes,  and  each 
person  must  get  his  money's  worth  of  good.  Tax- 
ation is  robbery  when  it  is  used  otherwise  than  for 
the  benefit  of  all.  The  Tweed  Ring  in  New  York, 
capturing  the  city  government  and  the  taxing 
power,  simply  spoiled  the  people  in  general  under 
forms  of  law,  instead  of  picking  their  pockets  one 
by  one  in  the  street.  So  when  Topeka,  Kansas, 
undertook  to  give  $100,000  to  a  manufacturing 
company  to  locate  its  shops  in  that  city,  the  Unit- 
ed States  Supreme  Court  declared  that  taxation 
"  to  aid  private  enterprises  and  build  up  private 


2l8 


ECONOMICS  FOR  THE  PEOPLE. 


fortunes  is  none  the  less  a  robbery.  There  can  be 
no  lawful  tax  which  is  not  laid  for  public  purposes." 
Those  who  oppose  tariff  taxes  intended  to  build 
up  particular  industries  claim  that  these  are  a  sim- 
ilar robbery  of  the  people  taxed  by  the  increase  of 
price.  The  exemption  of  one  set  of  persons  or 
kind  of  goods,  while  other  competing  persons  or 
goods  are  taxed,  also  gives  one  an  advantage  at 
the  expense  of  others. 

The  purposes  for  which  it  is  generally  consid- 
ered that  Government  may  properly  levy  taxes  in- 
clude the  actual  cost  of  legislation  and  executive 
work,  covering  public  buildings  as  well  as  sala- 
ries and  expenses ;  the  enforcement  of  justice  by 
courts,  prisons,  and  police ;  the  common  defence 
by  army  and  navy ;  public  works,  such  as  sewer- 
age and  water  systems ;  education  by  means  of 
public  -  schools ;  enterprises  for  the  common  good 
beyond  the  scope  of  private  organization,  such  as 
the  postal  system  and  exploring  expeditions ;  and, 
within  close  limits,  the  care  of  the  defective  and 
destitute  classes. 

The  people  of  the  United  States  paid  in  the 
census  year  1890  $1,040,000,000  for  their  govern- 
ment, being  from  7.  to  8  per  cent,  of  their  annual 


TAXATION  AND  NATIONAL  DEBT.  2ig 

product,  or  1-^  per  cent,  of  their  total  property 
— about  $16  for  each  person  or  $46  for  each 
worker.  Of  this  more  than  half  was  direct  tax- 
ation for  State  and  local  purposes :  according 
to  the  census  of  1890,  $116,000,000  State,  $133,- 
000,000  county,  $329,000,000  city  and  local,  in  all 
$578,000,000  on  a  valuation  of  $25,500,000,000,  of 
which  $19,000,000,000  was  real  and  §6,500,000,000 
personal  property  (the  last  being  absurdly  low, 
because  of  the  difficulty  of  finding  out  about  it). 
The  purposes  for  which  city  taxes  are  used  were 
illustrated  by  an  analysis  of  New  England  city 
debts,  which  showed  20  per  cent,  for  water-works, 
15  per  cent,  for  streets  and  bridges,  6  per  cent,  for 
parks  and  public  places,  3f  per  cent,  for  public 
buildings,  3  per  cent  for  fire  departments,  3  per 
cent,  for  sewers,  28^  per  cent,  for  refunding  old 
debt,  and  10  per  cent,  for  railroad  and  other  aid. 
The  nominal  tax  rate  of  cities  ranges  from  80  cents 
to  $5.76,  of  States  from  10  cents  to  90  cents,  per 
$100.  The  National  Government  in  1894-5  raised 
$152,158,000  by  customs  and  $143,421,000  by  inter- 
nal revenue  tax,  besides  $76,983,000  postal  reve- 
nue, and  $17,800,000  miscellaneous  receipts — $390,- 
373,000  in  all.    The  national  debt,  the  cost  of  our 


220  ECONOMICS  FOR  THE  PEOPLE. 

war,  which  in  1866  reached  over  $2,750,000,000,  is 
now  under  $1,126,000,000  (net),  costing  $3 1,000,000 
interest,  and  the  State  and  local  debts  (after  deduct- 
ing from  the  gross  debt  the  "  sinking  funds,"  i. 
moneys  set  apart  to  pay  debts)  were  by  the  census 
$1,135,000,000,  costing  about  $60,000,000  interest, 
in  all  about  $2,260,000,000,  costing  about  $91,000,- 
000  interest  yearly.  This  is  a  debt  of  over  $32  for 
every  man,  woman,  and  child,  involving  a  tax  for  in- 
terest of  over  $4  yearly  on  every  earner  in  the  United 
States.  It  used  to  be  said  that  "a  national  debt 
is  a  national  blessing;"  but  this  meant  only  that 
our  war  for  the  Union  was  worth  in  lives  and 
money  all  it  cost.  Debt  is  in  itself  not  a  blessing 
but  a  curse.  Taxes  and  debt  are  good  or  evil  ac- 
cording to  what  we  gain  by  them.  Europe  is  bur- 
dened by  debts  of  over  $22,000,000,000,  involving 
a  yearly  tax  of  over  $1,000,000,000  on  her  hard- 
worked  people,  which  represents  chiefly  the  waste 
of  needless  war. 

Adam  Smith  laid  down  four  famous  canons  of 
taxation :  that  each  citizen  should  pay  in  propor- 
tion to  his  abilities,  i.  e.,  on  the  property  enjoying 
or  claiming  the  protection  of  the  taxing  power; 
that  a  tax  should  be  certain  and  not  arbitrary,  the 


TAXATION  AND  NATIONAL  DEBT.  221 

time  and  manner  of  payment  and  the  amount 
plain  to  all ;  that  it  should  be  collected  when  it 
can  be  easiest  and  as  it  can  be  easiest  paid  ;  that 
it  should  take  out  and  keep  out  of  the  pockets  of 
the  people  as  little  as  possible  over  what  it  brings 
into  the  treasury.  That  is,  a  tax  should  be  laid 
equitably  and  definitely,  and  collected  with  con- 
venience and  economy.  The  difficulty  in  these 
rules  lies  in  their  application — whether  as  to  meth- 
ods of  taxation,  direct  or  indirect,  or  as  to  subjects 
of  taxation,  which  may  be  "  persons,  business,  or 
property.'' 

A  tax  on  persons  is  called  a  poll  {i.e.,  head)  tax; 
this  is  a  form  of  direct  tax  that  has  almost  gone 
out  of  use  except  for  keeping  some  kind  of  count; 
in  Massachusetts,  until  lately,  and  in  other  States, 
no  one  could  vote  until  he  had  paid  his  yearly  poll- 
tax  of  $2.  A  tax  on  business  may  be  a  license  or 
occupation  tax,  such  as  a  liquor -dealer  or  hack- 
driver  pays  before  he  can  do  business  —  chiefly 
used  now  to  regulate  callings  partly  public  in  their 
nature ;  or  a  tax  on  evidences  of  transactions,  as 
by  " stamps"  on  a  contract;  or  a  tax  on  the 
amount  of  business,  as  on  sales.  Of  this  sort  also 
are  tariff  and  excise  taxes,  though  they  seem  to  be 


222  ECONOMICS  FOR  THE  PEOPLE. 

levied  on  property.  A  tariff  (from  the  Spanish 
tarifa,  a  list  of  rates)  is  a  schedule  of  taxes,  often 
called  duties,  collected  at  the  "  custom-houses/*  on 
goods  imported  from  other  countries.  In  "a  tariff 
for  revenue  only  "  duties  are  so  low  that  goods  are 
still  brought  in  and  pay  revenue  to  the  Govern- 
ment ;  in  "  a  protective  tariff 99  duties  are  so  high 
that  foreign  goods  are  kept  out,  so  that  manufact- 
urers may  get  higher  prices  for  goods  made  at 
home,  which  increase  the  people  pay,  though  the 
Government  gets  no  revenue.  Excise  or  "  inter- 
nal revenue"  taxes  are  those  collected  on  goods 
produced  at  home,  as  on  liquors  and  tobacco. 
These  are  all  indirect  taxes,  adding  to  price.  They 
are  the  least  disliked,  simply  because  they  are  not 
seen,  since  less  than  300,000,  or  a  half  of  one  per 
cent.,  of  our  people  seem  to  pay  them  ;  but  they  are 
the  most  costly,  requiring  great  numbers  to  collect 
them,  and  the  most  wasteful,  since  each  seller  not 
only  adds  them  in  his  price  but  adds  also  a  profit 
on  the  tax,  until  the  final  consumer  may  pay  on 
his  blanket  twice  the  actual  duty. 

Legacy  or  succession  taxes,  levied  in  England, 
are  taxes  on  property  received  by  bequest,  usually 
heavier  according  to  distance  of  relationship.  In- 


TAXATION  AND  NATIONAL  DEBT  22$ 

come  taxes  are  another  tax  on  property — a  pro- 
portion of  the  yearly  earnings  of  each  person. 
When  the  lower  incomes  are  exempted — as  during 
our  war  $600,  and  afterwards  $2000  —  this  tax  is 
one  on  superior  power,  i.  e.f  brains,  or  capital,  ex- 
empting labor.  These  are  hard  taxes  to  levy  just- 
ly and  to  collect  fully  —  people  do  not  tell  the 
whole  truth,  and  object  to  having  their  affairs 
"  spied  out ;"  also  many  cannot  really  fix  their  in- 
come in  money — so  that  they  were  given  up  soon 
after  the  war.  Taxes  on  property  are  accordingly 
chiefly  direct  taxes  on  personal  property  (mova- 
bles) and  real  property  (buildings  and  land).  The 
first  are  so  hard  to  fix  that  they  become  a  farce  ; 
while  the  wealth  of  the  country  has  been  steadily 
increasing,  the  valuation  of  personal  property 
shows  a  falling  off.  Thus  while  the  total  valua- 
tion of  New  York  City  is  over  $2,106,000,000,  per- 
sonal property  under  $375,000,000  is  all  that  is 
found  to  tax.  Under  the  personal  property  tax, 
also,  the  mistake  is  often  made  of  taxing  evidences 
of  debt  as  well  as  wealth  ;  of  taxing  a  mortgage 
of  $5000  in  addition  to  the  $10,000  house  it  is  on, 
though  there  is  in  all  only  $10,000  of  property  to 
tax.    Taxes  on  real  property  are  thus  becoming 


224  ECONOMICS  FOR  THE  PEOPLE. 

the  main  element  of  Government  revenue,  since 
land  and  houses  cannot  run  away  or  hide,  and  their 
value  is  easily  determined. 

The  old  system  of  taxation  was  to  lay  a  tax  on 
everything — "  infinitesimal  taxation,"  and,  as  Col- 
bert put  the  "art  of  taxation,"  to  "so  pluck  the 
goose  [i.  e.y  the  people]  as  to  get  the  most  feathers 
with  the  least  squealing/'  A  self-governing  peo- 
ple ought,  on  the  contrary,  to  have  the  simplest 
possible  system  of  taxation,  so  that  they  may  look 
taxes  squarely  in  the  face  and  make  sure  that  they 
get  the  worth  of  each  cent  they  pay.  The  New 
York  State  Commission  of  1870,  in  the  famous 
reports  of  Mr.  Wells,  recommended,  accordingly, 
that  State  taxes  be  confined  to  (1)  a  tax  on  cor- 
porations having  a  monopoly,  as  gas  companies, 
which  cannot  remove  ;  (2)  a  tax  on  land  and  build- 
ings ;  (3)  a  tax  based  on  a  valuation  of  three  times 
the  rental  value  of  the  house  in  which  a  man  lives, 
in  lieu  of  tax  on  personal  property,  on  the  ground 
that  a  man's  wealth  and  income  are  fairly  tested 
by  the  cost  of  his  residence.  Other  economists, 
among  them  John  Stuart  Mill,  favor  the  laying  of 
taxes  chiefly  upon  land,  especially  on  the  valuation 
of  unimproved  land  in  the  neighborhood.  This 


TAXATION  AND  NATIONAL  DEBT  22$ 

system — taxing  unused  land  as  much  as  used — 
would  prevent  the  accumulation  of  vast  estates  of 
land  held  unused  "to  wait  a  rise,"  and  would  throw 
the  burden  of  taxation  upon  city  landholders, 
whose  land  has  risen  in  value  chiefly  by  the  "  un- 
earned increment "  from  the  progress  of  society, 
while  relieving  farmers  who  by  improving  their 
land  are  doing  service  to  society.  Mr.  Henry 
George's  proposed  system  carries  the  idea  of  land 
taxation  still  further;  he  would  lay  a  tax  equal  to 
rent  (using  the  word  in  the  economic  sense),  and 
thus  take  the  whole  of  the  "unearned  increment" 
for  public  purposes,  leaving  to  the  landholder  only 
the  earnings  of  his  labor,  capital,  and  brains. 

The  taxing  power  of  a  Government  does  not  go 
beyond  its  own  boundaries.  A  country,  or  State, 
or  city  which  overtaxes  or  misuses  taxes,  drives 
wealth  and  population  outside  its  boundaries  be- 
yond its  taxing  power,  and  so  increases  the  bur- 
den on  each  person  who  remains.  As  it  is  found 
that  taxation  bears  not  so  much  upon  the  value 
of  business  done  as  upon  the  profit  made,  a  very 
slight  change  will  drive  manufactories,  for  instance, 
from  one  town  or  State  to  some  other  town  or 
State  where  the  tax  conditions  may  be  more  favor- 


226  ECONOMICS  FOR  THE  PEOPLE. 

able.  "Never  tax  anything/'  says  a  modern  au- 
thority, "that  would  be  of  value  to  your  State, 
that  could  or  would  run  away,  or  that  could  and 
would  come  to  you."  The  American  people  will 
probably  come,  within  a  generation,  to  the  sim- 
plest form  of  taxation,  levying  a  single  tax  on 
land,  at  its  fixed  place,  not  where  the  owner  lives, 
by  which  probably  the  national  as  well  as  State 
and  local  taxes  will  be  collected  on  one  system  by 
the  same  tax-gatherers,  half-yearly  or  quarterly, 
and  each  tax-payer  will  know  all  he  pays  and  how 
it  is  spent. 

Legislation  in  the  form  of  taxation  has  always 
a  strong  indirect  effect  in  directing  consumption 
from  or  into  certain  channels,  and  the  objects  and 
methods  of  taxation  must  always  be  brought  to 
this  economic  test.  The  thing  which  is  taxed,  or 
the  form  of  industry  which  is  taxed,  is  put  at  a 
disadvantage  beside  that  which  is  not  taxed,  with 
the  result  of  increasing  price  and  so  decreasing 
demand.  The  statesman  whose  sole  purpose  is 
to  raise  revenue  cannot  overlook  the  fact  that  the 
method  and  subject  of  taxation  greatly  influence 
the  every -day  life  of  his  people,  especially  since 
the  cost  of  government  is  sometimes  ten  per  cent. 


TAXATION  AND  NATIONAL  DEBT.  227 

of  all  expenses.  A  tax  on  liquor  has  been  a  favor- 
ite tax  because  it  increases  the  cost  of  drinking ; 
on  the  other  hand,  it  has  a  tendency  to  promote 
the  adulteration  of  liquors,  and  so  to  poison  those 
who  will  drink  anyway.  There  is  a  popular  cry 
to  tax  luxuries,  but  it  is  always  difficult  to  draw 
the  line  between  necessaries  and  luxuries;  thus 
people  are  divided  as  to  whether  tea  and  coffee 
ought  to  be  taxed  or  not  taxed. 

Taxes,  as  an  item  of  distribution  in  business 
reckonings,  belong  in  part  to  wages,  so  far  as  the 
Government  is  preventive  and  is  paid  for  public 
service  as  a  watchman  is  paid,  and  in  part  to  in- 
terest, so  far  as  the  Government  is  constructive 
and  furnishes  roads,  bridges,  and  other  capitalist 
elements  in  production.  A  constructive  Govern- 
ment easily  becomes  a  paternal  Government,  fa- 
thering all  sorts  of  enterprises.  The  tendency  of 
the  exercise  of  the  taxing  power  is,  in  fact,  to  make 
a  Government  paternal.  The  comparative  useful- 
ness of  preventive  and  paternal  functions  in  Gov- 
ernment is  rather  outside  of  Economics,  but  it  may 
be  noted  that  this  seems  to  vary  with  the  develop- 
ment of  a  people  :  a  Government  which  takes  upon 
itself  wide  constructive  work  being  the  most  useful 


228 


ECONOMICS  FOR  THE  PEOPLE. 


in  communities  in  which,  as  in  India,  the  body  of 
the  people  lack  mobility,  organizing  capacity,  and 
foresight,  and  look  to  Government  to  supply  this 
lack  of  mastership,  and  least  useful  in  communi- 
ties which  have  these  qualities  in  high  degree,  are 
their  own  leaders,  and  are  self-regulating.  A  pa- 
ternal Government  is  always  in  danger  of  making 
wholesale  mistakes,  and  doing  harm  instead  of 
good  accordingly0 


XXVII. 


THE  USING  OF  WEALTH  CONSUMPTION. 

The  purpose  of  wealth  is  use.  Men  produce 
solely  to  consume.  Consumption,  the  final  aim  of 
production  and  exchange,  though  economists  arc 
but  just  beginning  to  study  it,  is  in  one  sense 
the  most  practical  department  of  all ;  for,  more 
than  anything  else,  this  is  within  human  control 
and  direction.  Our  desires  van*  with  the  kind 
and  strength  of  the  motives  we  cultivate  in  our- 
selves. The  savage,  for  instance,  desires  great 
quantities  of  food,  and  a  big  fire  to  keep  him 
warm :  a  few  things,  in  large  quantities,  satisfy 
him.  As  civilization  advances,  desires  increase  in 
variety,  and  begin  to  look  rather  to  quality  than  to 
quantity.  The  civilized  man  eats  less  of  any  one 
thing,  but  his  appetite  is  developed  to  desire  varie- 
ty of  food  ;  and  instead  of  using  great  quantities  of 
fuel  to  warm  him,  he  dresses  more  warmly,  builds 


230  ECONOMICS  FOR  THE  PEOPLE. 

a  better  house,  and  so  needs  less  instead  of  more 
fuel.  This  "law  of  variety  "  of  desires  gives  the 
key  to  economic  progress.  We  always  want  more 
than  we  can  get.  Human  desires  multiply  beyond 
the  means  of  satisfying  them.  There  cannot  be 
too  much  in  the  total,  though  there  may  be  more 
at  one  time  or  place  than  is  wanted  of  any  one 
thing. 

The  great  fact  here  is  that  supply  is  controlled 
by  demand  rather  than  demand  by  supply.  When 
we  go  to  a  store  we  buy  what  we  want,  rather  than 
what  the  store-keeper  wants  to  sell  us.  Statutes 
cannot  control  demand;  "sumptuary  laws,"  tell- 
ing men  how  they  shall  or  shall  not  dress  or  eat, 
have  always  failed.  But  one  thing  can — an  intel- 
ligent sense  of  moral  and  economic  laws,  moulding 
public  opinion  to  a  higher  standard  of  life.  There 
is  no  factor  in  the  world  so  strong ;  for  it  holds 
with  the  savage  as  with  the  civilized  man,  and 
with  the  pagan  as  with  the  Christian.  Wise  legis- 
lation may  help  ;  but  laws  against  public  opinion 
prove  only  a  dead  letter  or  a  hinderance.  It  is 
found,  indeed,  that  there  is  a  natural  order  or  scale 
along  which  men  seek  to  gratify  desires.  Their 
first  requisite,  after  air,  is  food  ;  next  clothing  and 


THE  USING  OF  WEALTH— CONSUMPTION'.  23 1 

housing;  next  ornament  and  amusement;  and, 
later,  food  of  the  mind.  With  civilization  these 
wants  become  infinitely  varied,  and  the  higher 
wants  control  more  and  more.  The  important 
thing,  therefore,  in  national  as  in  personal  devel- 
opment is  that  people  should  be  trained  by  their 
preachers,  their  teachers,  their  newspapers,  and 
their  statesmen  to  desire  good  things  and  to  avoid 
waste.  "  Tell  me  what  you  like  " — what  you  want 
— says  Mr.  Ruskin,  writing  of  Economics,  "  and  I'll 
tell  you  what  you  are." 

The  great  preventable  wastes  in  this  country 
are  from  fire,  from  liquor,  crime,  pauperism — these 
three  closely  connected ;  from  waste  of  food,  and 
from  the  waste  of  unemployed  labor  under  inad- 
equate industrial  conditions.  The  annual  fire  loss 
of  the  country  is  now  about  $150,000,000  per  year 
(of  which  the  $90,000,000  paid  by  insurance  com- 
panies is  none  the  less  loss),  the  cost  of  sustaining 
insurance  companies  is  over  $53,000,000,  the  cost 
of  fire  departments  is  perhaps  $40,000,000 — in  all 
nearly  $250,000,000  per  year,  or  over  one  dollar  and 
a  half  in  each  hundred  dollars'  worth  produced,  or 
about  12  to  15  per  cent,  on  the  possible  savings  in  a 
prosperous  year.    Much  of  this  could  be  saved  by 


232  ECONOMICS  FOR  THE  PEOPLE. 

common-sense  construction,  common  skill  in  pre- 
vention of  loss,  and  common  care  in  the  use  of 
property,  which  have  already  resulted,  as  applied 
through  mutual  insurance  inspections,  in  reducing 
greatly  the  proportion  of  fire  loss  to  property  in- 
sured. The  "  drink-bill  "  of  this  country  is  figured 
by  Mr.  F.  N.  Barrett  at  over  $1,000,000,000  yearly, 
including  over  85,000,000  gallons  of  spirits,  aggre- 
gating nearly  $400,000,000 ;  over  1 ,000,000,000  gal- 
lons of  beer,  aggregating  $500,000,000;  and  40,- 
000,000  gallons  of  wine,  aggregating  $100,000,000. 
This  drink-bill  is  nearly  as  much  as  all  the  taxes,  and 
absorbs  from  7  to  10  per  cent,  of  our  exchangeable 
product.  Our  loss  by  the  82,329  criminals  reported 
in  jail  in  1890,  and  the  many  more  out  of  jail,  is 
incalculable.  Mr.  Dugdale  estimated  that  the  act- 
ual loss,  and  the  potential  loss  from  idleness  and 
early  death,  in  the  case  of  "  The  Jukes  "  criminal 
family  alone,  numbering  1200  people,  was  in  75 
years  $1,258,000.  The  73,044  paupers  reported  in 
almshouses  form  but  a  small  part  of  the  pauper 
burden.  Mr.  Edward  Atkinson  estimates  the  con- 
sumption of  food  (excluding  liquors)  in  this  coun- 
try at  a  minimum  of  $6,600,000,000.  Probably  10 
per  cent,  is  a  low  estimate  of  food  waste,  i.  e.,  we 


THE  USING  OF  WEALTH— CON  SUMPTION.  233 

could  save  by  wiser  living  over  $660,000,000  per 
year.  Due  precautions  against  fire,  the  growth  of 
temperance,  the  reduction  of  crime  and  pauperism, 
and  the  wiser  use  of  food,  could  add  to  our  na- 
tional wealth  each  year  much  more  than  the  pres- 
ent amount  of  our  total  annual  savings.  In  addi- 
tion to  all  this,  better  industrial  organization  will 
save  the  enormous  loss  by  unemployed  labor. 

Of  late  years  economists  have  begun  to  give 
much  attention  to  the  savings  and  spendings  of 
the  people.  Dr.  Engel,  a  German  economist,  has 
shown  that  the  smaller  a  man's  income  the  larger 
is  the  proportion  of  it  he  spends  for  food  ;  while 
clothing  remains  nearly,  and  rent,  fuel,  and  light 
almost  exactly,  the  same  proportion  with  different 
incomes.  Thus,  as  a  man's  income  increases,  he 
spends  more  and  more  in  proportion  for  the  high- 
er "  sundry  expenses,"  such  as  education,  worship, 
legal  protection,  health  preservation,  and  recrea- 
tion. In  Germany,  Dr.  Engel  found,  working-men 
who  earn  $225  to  $300  yearly,  the  middle -class 
earning  $450  to  $6oo,  and  the  well-to-do  having 
$750  to  $1100  incomes,  all  paid  about  12  per  cent, 
for  lodging  and  5  per  cent,  for  fire  and  light ;  the 
working-men  16  and  the  others  18  per  cent,  for 


234  ECONOMICS  FOR  THE  PEOPLE. 

clothing;  while  for  subsistence  the  working-man 
had  to  use  62  per  cent.,  leaving  only  5  per  cent, 
for  higher  needs;  the  middle-class  spent  55,  leav- 
ing 10  per  cent. ;  and  the  well-to-do  only  50,  leaving 
15  per  cent,  for  " sundries"  and  savings.  The  sta- 
tistics of  Great  Britain  show  that  a  working-man's 
family  earning  $500  (out  of  which  they  save  1.76 
per  cent.)  spend  for  rent  13^  per  cent.,  for  fuel  3-§-, 
for  clothing  18,  for  subsistence  51^,  for  sundries 
13J  per  cent,  of  the  total  out-go.  The  average  of 
the  "  working-men's  budgets"  collected  in  Massa- 
chusetts by  its  Bureau  of  Labor  Statistics  show 
on  a  family  income  of  $750  (of  which  6.1 1  per  cent, 
is  saved)  a  percentage  for  rent  of  20,  fuel  4^-,  cloth- 
ing 16,  subsistence  49,  sundries  11  per  cent,  of  the 
total  out-go. 

Out  of  our  annual  product  as  a  nation,  of  $14,- 
000,000,000  (in  i88o)fwe  consumed  as  food  and 
drink,  according  to  Mr.  Atkinson,  about  $6,600,000,- 
000,  nearly  half.  The  rentals  we  paid  each  other 
(including  payment  for  buildings)  would  probably 
reach  $1,800,000,000,  with  an  additional  $500,000,- 
000  for  fuel  and  light.  Our  clothing  costs  about 
$1,300,000,000.  We  pay  about  $1,050,000,000  in 
taxes,  part  of  which  goes  to  such  items  as  water- 


THE  USING  OF  WEALTH— CONSUMPTION.  235 

supply,  education,  etc.  For  education  itself  we 
pay  considerably  above  $180,000,000  yearly;  ex- 
penditure for  religious  purposes  covers  many  mill- 
ions more.  Our  annual  savings  arc  estimated  vari- 
ously at  from  $1,000,000,000  to  $1,400,000,000.  In 
the  present  state  of  economic  statistics,  however, 
these  figures  are  little  more  than  broad  guesses. 

We  produce  to  consume,  but  it  is  also  true  that 
we  consunoe  to  produce.  We  consume  ore  to  pro- 
duce "  pig- iron,"  and  "pig"  to  make  bar -iron  or 
steel,  and  this  to  produce  machinery,  and  this  we 
wear  out  in  making  other  things,  as  ploughs  to  raise 
wheat.  We  consume  wheat  to  produce  flour,  this 
to  make  bread,  this  to  make  muscle,  this  to  dig 
ore  perhaps.  Wealth  used  as  capital  gives  us  pro- 
ductive consumption ;  when  we  use  product  sim- 
ply to  gratify  *our  desires,  it  is  non-productive  con- 
sumption. But  it  is  not  easy  to  draw  a  clear  line ; 
bread  may  be  food  and  cake  luxury,  but  a  bun 
is  either  or  both.  So,  also,  we  may  speak  of  de- 
structive consumption,  in  which  the  article  con- 
cerned is  destroyed  by  use,  as  food  or  fuel,  and 
what  we  may  call  conserving  consumption,  in  which 
the  article  ministers  to  desire  again  and  again,  as 
a  house  or  a  tool  which  does  not  wear  out  for  a 


236  ECONOMICS  FOR  THE  PEOPLE. 

long  time,  or  is  without  any  loss  by  use,  as  a  book 
or  a  picture,, 

There  are  two  opposite  notions  of  consumption 
equally  untrue — that  spending  is  in  itself  desira- 
ble, and  that  saving  is  in  itself  desirable.  Some 
think  that  to  spend  a  great  deal  of  money,  as  in 
a  Vanderbilt  ball  at  which  the  flowers  alone  cost 
$4000,  is  a  great  good,  because  it  "  makes  trade." 
They  forget  that  waste  is  not  wealth-making ;  war, 
fire,  the  sinking  of  a  ship,  also  "  make  trade,''  be- 
cause by  destroying  existing  capital  they  increase 
demand.  The  wealth  thus  wasted  would,  more 
wisely  used,  furnish  capital  to  many  more  people 
in  creating  more  wealth.  On  the  other  hand, 
hoarding  is  not  wealth  -  making ;  wealth  hoarded 
is  withdrawn  from  capital  without  doing  any  one 
good.  The  truth  lies  between  :  that  man,  or  that 
nation,  is  best  off  which  consumes  most  in  the 
higher  part  of  the  scale ;  which  keeps  its  consump- 
tion below  its  production,  so  that  it  accumulates 
wealth  ;  which  keeps  productive  consumption  high 
in  proportion  to  non-productive  consumption.  It 
is  not  how  much  is  consumed,  but  how  it  is  con- 
sumed, that  tells. 

All  producers  are  consumers  ;  but  certain  classes 


THE  USING  OF  WEALTH— CONSUMPTION.  237 

of  consumers  arc  often  referred  to  non-productive 
consumption  —  as  domestic  servants  and  profes- 
sional men.  But  most  human  labor,  unless  mis- 
directed, is  actually  productive;  for  a  domestic 
servant  saves  the  force  of  a  person  of  greater  pro- 
ductivity, a  doctor  keeps  him  in  working  order,  a 
lawyer  helps  to  make  it  possible  to  transact  busi- 
ness with  surety,  a  clergyman  promotes  morality 
and  thus  renders  it  easier  to  exchange  justly  and 
profitably.  There  nevertheless  remains  :i  certain 
proportion  of  service  and  of  corresponding  pay- 
ment in  most  of  these  cases,  which  must  truly  be 
referred  to  non-productive  consumption. 

The  final  question  of  consumption  is  whether 
population,  which  can  increase  like  compound  in- 
terest, will  in  the  increased  demand  for  food  out- 
run the  supply,  since  food  is  subject  to  the  law  of 
diminishing  returns.  Malthus  points  out  that  the 
lowest  population  are  less  self-restrained  and  breed 
most  freely.  To  the  present  time,  however,  each 
generation  since  Malthus  has  had  more  food  in- 
stead of  less  than  that  preceding,  because  of  in- 
creased production.  This  problem  of  population, 
food,  and  land,  like  that  of  the  exhaustion  of  the 
coal  beds,  is  one  of  the  far  future ;  and,  as  other 


238  ECONOMICS  FOR  THE  PEOPLE. 

natural  products  like  oil,  or  forces  like  electricity 
and  direct  solar  energy,  are  beginning  to  help  out 
coal,  so  many  other  elements  temper  this  fear  for 
the  future.  The  valleys  are  always  being  replen- 
ished by  the  disintegration  of  the  hills,  as  well  as 
by  the  gifts  of  the  rain  and  the  air ;  but  as  to  when 
the  earth  becomes  one  level  and  the  sun  grows 
cold,  who  shall  say,  or  who  can  profitably  think  ? 
The  experience  of  the  world  so  far  has  been  that 
man  has  continually  bettered  himself,  by  discover- 
ing new  methods  of  utilizing  the  forces  of  nature, 
which  gives  us  reason  to  believe  that  the  human 
race,  as  it  learns  to  use  the  earth  at  its  best,  will 
have  more  food  instead  of  less. 


XXVIII. 


THE  EARLY  HISTORY  AND  LITERATURE  OF  ECO 
NOMICS. 

THE  study  of  economic  history  and  literature 
is  useful  in  three  ways — to  show  us  the  develop- 
ment of  thought,  to  give  us  the  facts  from  which 
to  obtain  or  verify  economic  laws,  to  enable  us  to 
follow  or  to  avoid  the  courses  which  have  made 
other  nations  great  or  brought  them  to  their  ruin. 
The  scientific  study  of  Economics  as  a  systematic 
body  of  natural  law  is  essentially  modern,  dating 
scarcely  beyond  the  sixteenth  century.  But  eco- 
nomic laws,  institutions,  and  facts  have  existed 
from  the  beginning  of  human  history.  The  Bible, 
the  Babylonian  bricks,  and  the  writings  of  Herod- 
otus, "the  father  of  history,"  give  us  the  earliest 
references  to  trade,  weights  and  measures,  coinage, 
taxation,  and  other  economic  institutions.  The 
Jews  have  always  been  traders.  Solomon  was  a 
great  merchant  king.    Their  government  revenue 


240  ECONOMICS  FOR  THE  PEOPLE. 

came  from  tithes.  The  Babylonians  sold,  leased, 
and  mortgaged  houses,  loaned  money  at  interest, 
worked  land  on  shares,  coined  gold  and  silver  at  a 
fixed  ratio  of  i  to  1 3^,  and,  according  to  Herodo- 
tus, "were  the  first  to  sell  goods  at  retail."  Da- 
mascus means  "  a  seat  of  trade ;"  Tyre  was  a  great 
centre  of  commerce  (Ezekiel  xxvii.)  and  of  colo- 
nization.* 

The  ancient  States  were  founded  on  slavery ; 
Aristotle  declared  that  "  nature  creates  some  men 
for  liberty  and  others  for  slavery."  In  the  "  de- 
mocracy "  of  Athens  three-fourths  of  the  population 

*  Blanqui's  "  History  of  Political  Economy  in  Europe,"  writ- 
ten in  French  in  1837,  and  translated  from  the  edition  of  1842,  is 
an  informing  study  of  ancient  and  mediaeval  economic  institutions 
and  of  later  economic  science,  up  to  1842,  but  not  very  systematic 
or  satisfactory.  Kautz's  more  comprehensive  German  history  (i860) 
is  not  translated.  Professor  Perry  prefaces  his  larger  "  Political 
Economy  "  (18th  ed.,  1883)  with  a  useful  general  view  of  early  eco- 
nomic methods  and  of  schools  of  economists.  On  the  literature  of 
the  subject,  Cossa's  "  Guide  to  the  Study  of  Political  Economy," 
translated  from  the  Italian  (1880),  is  the  best  authority;  an  excel- 
lent popular  summary,  since  1500  and  up  to  date,  prefaces  Professor 
Laughlin's  abridgment  (1884)  of  the  "  Principles  of  Political  Econ- 
omy "  of  John  Stuart  Mill.  See  also  the  classified  and  annotated 
"  Reader's  Guide  "  of  the  Society  for  Political  Education. 


HISTORY  AND  LITERATURE  OF  ECONOMICS.   24 1 

were  non-voting  slaves,  who  were  the  laborers  and 
mechanics.  The  Greeks,  accordingly,  despised  in- 
dustry and  shopkeeping,  and  honored  agriculture 
and  commerce.  The  Athenians  laid  import  duties 
of  2  per  cent,  at  home,  or  5  per  cent,  at  the  ports 
of  subject-allies,  but  their  revenue  was  chiefly  from 
tributes,  from  confiscations,  and  from  fines.  Inter- 
est was  left  to  take  care  of  itself.  They  made 
public  loans  ;  in  time  of  peace  they  saved  the  rev- 
enues for  war.  Each  citizen  felt  himself  a  share- 
holder in  the  State ;  a  relentless  public  opinion 
punished  public  debtors  and  betrayers  of  trust. 
Athens  broke  down  under  luxury,  slavery,  dema- 
gogic truckling,  public  patronage,  and  commun- 
ism :  her  citizens,  unused  to  work,  began  to  rely 
on  State  aid,  to  banish  rich  men  for  the  sake  of 
the  confiscations,  and  to  clamor  for  distribution  of 
public  funds. 

Several  Greek  writers  treated  economic  subjects, 
though  they  did  not  reach  down  to  the  recogni- 
tion of  economic  laws.  Xenophon  wrote  a  dia- 
logue called  "The  Economist,"  in  which  he  speaks 
of  Economics  as  a  study  by  itself,  and  a  tract  on 
the  revenues  of  Athens,  proposing  to  increase 
them  by  encouraging  immigration,  honoring  mer- 
16 


242  ECONOMICS  FOR  THE  PEOPLE. 

chants,  expediting  commercial  trials,  and  estab- 
lishing a  Council  of  Peace.  He  had  correct  no- 
tions of  wealth — "  Wealth  is  only  that  which  can 
be  useful  to  us;"  and  of  the  State  he  said,  "One 
has  very  long  arms  when  he  has  those  of  an  entire 
people."  Plato  discusses  money,  trade,  and  the 
division  of  labor  in  his  ideal  "  Republic. "  Aris- 
totle, the  disciple  of  Plato  and  the  teacher  of  Al- 
exander the  Great,  is  the  first  great  systematic 
writer  on  Economics,  in  his  "Politics"  (founded 
on  his  collection  of  the  constitutions  of  158  States), 
"  Ethics,"  and  "  Chrematistics  "  (or  science  of  prop- 
erty), the  fourth  book  of  which  deals  with  political 
economy,  44 the  administration  of  free  States"  or 
cities.  The  book  known  as  his  "  Economics  "  was, 
however,  compiled  in  a  later  century.  He  found- 
ed his  system  on  the  Greek  belief  in  slavery,  but 
points  out  that  "  the  middle-class  is  the  surest  ba- 
sis of  a  good  social  organization,"  and  warns  against 
social  struggles  in  States  which  have  "  only  poor 
and  rich,  that  is,  extremes  and  no  means,"  in  which 
the  conqueror  "  takes  good  care  not  to  establish  a 
constitution  on  principles  of  equal  rights,  [but]  re- 
gards the  government  as  the  prize  of  victory,  [and] 
gives  it  the  livery  of  his  party."    He  thought  "  the 


HISTORY  AND  LITERATURE  OF  ECONOMICS.  243 

best  nation  is  a  nation  of  farmers,"  and  despised 
mechanics  and  tradesmen  ;  but  he  points  out  that 
administrators  are  also  wealth-producers  and  "the 
very  soul  of  the  city."  Property,  he  says,  has  two 
uses,  one  natural,  the  other  artificial  or  industrial, 
as  an  object  of  exchange — almost  the  exact  dis- 
tinction of  Adam  Smith  between  value  in  use  and 
value  in  exchange.  He  shows  also  the  true  nature 
of  money,  "an  intermediary  commodity  designed 
to  facilitate  an  exchange  of  two  other  commodi- 
ties." 

Rome  began,  probably,  as  a  seat  of  trade  for  the 
Tiber  valley,  whose  people  were  herdsmen  and 
peasant  proprietors  working  small  farms.  A  hardy 
race,  fit  for  war,  the  Romans  soon  turned  from  the 
arts  of  peace  and  founded  a  military  State,  based 
industrially  on  slavery,  and  enslaving  conquered 
nations.  War  developed  great  administrative  pow- 
ers, until  at  last  the  superb  despotism  of  the  em- 
pire came  into  being,  and  Rome,  the  city,  sucked 
the  life-blood  of  the  provinces.  The  Romans 
praised  agriculture,  but  preferred  war ;  they  de- 
spised shops  and  ships,  leaving  commerce  chiefly 
to  conquered  nations  of  sailors.  Industry  and 
commerce,  said  Cicero,  "  are  to  be  regarded  as  dis- 


244  ECONOMICS  FOR  THE  PEOPLE. 

graceful/'  though  on  a  large  scale  "they  must  not 
be  altogether  condemned. "  Slaves,  treated  worse 
than  beasts  and  contracted  for  in  droves,  did  even 
such  work  as  architecture  and  business  manage- 
ment ;  though  they  were  commonly  overseen  by 
"  freedmen,"  who  were  attached  to  their  slave- 
owning  patrons  as  "  clients/'  Caste  ruled  the  so- 
cial organization ;  Augustus  sentenced  a  senator 
to  death  for  stooping  to  direct  a  workshop.  Con- 
quered nations,  like  Carthage,  furnished  the  com- 
merce of  Rome.  Money,  contrary  to  the  Greek 
doctrine,  was  considered  the  chief  wealth,  and  its 
export  was  prohibited.  Interest  was  accordingly 
high,  discount  reaching  in  known  cases  70  per  cent., 
while  12  per  cent,  was  thought  low.  Revenue, 
reaching  $200,000,000,  came  from  import  taxes — 
chiefly  2\  per  cent,  on  luxuries,  but  varying  in  dif- 
ferent provinces — and  export  taxes;  from  a  land- 
tax  of  a  tithe  of  grain  and  a  fifth  of  other  agricult- 
ural products,  and  from  the  scriptura  on  pastures 
and  public  woods.  A  tax  of  five  per  cent,  on  mer- 
chandise at  public  sale,  a  like  tax  on  inheritances, 
and  other  special  taxes,  as  Caligula's  on  food,  were 
laid  in  later  days.  These  and  the  tribute-moneys 
of  conquered  nations,  were  farmed  out  to  contract- 


HISTORY  AND  LITERATURE  OF  ECONOMICS.  245 

ors,  who  collected  them  through  slaves  and  freed- 
men.  Great  roads  were  built  to  the  provinces,  but 
for  war  and  tribute,  not  for  trade.  Speculation, 
indeed,  took  the  place  of  trade  ;  the  rich  became 
richer  and  the  poor  poorer.  The  citizens  who  did 
not  like  work  had  to  be  fed  ;  "  these  dogs,"  said 
one  emperor,  "  cease  to  bark  only  when  they  have 
a  full  stomach."  Laws  were  passed  fixing  the 
price  of  grain,  granting  five  bushels  each  month  to 
needy  citizens,  and  scaling  debts.  Famines  led 
to  public  granaries,  the  "  sacred  fleet"  bringing  to 
Rome  the  crops  of  Sicily  and  Egypt  was  a  Gov- 
ernment project,  and  bounties  were  offered  on 
importations  of  grain.  The  small  farms  at  home 
could  no  longer  compete ;  creditors  swallowed  up 
these  farms;  and  their  " broad-farms  wrecked  Ita- 
ly," says  Pliny.  Thus  Rome,  defying  economic 
laws,  came  to  political  suicide. 

In  this  state  of  things  economic  writers  were 
not  wanted :  moralists,  like  Juvenal  the  satirist 
and  Seneca  the  Stoic,  set  themselves  in  vain  to 
stem  the  current  of  the  times,  and  Cato  and  "  the 
agriculturists"  to  bring  their  countrymen  back  to 
rural  arts,  but  the  economic  literature  of  Rome  is 
to  be  found  chiefly  in  Cicero  and  Pliny,  who  con- 


2\6  ECONOMICS  FOR  THE  PEOPLE. 

tributed  little,  however,  to  the  progress  of  the  sci- 
ence. In  the  Corpus  juris,  or  body  of  the  laws,  and 
in  the  Institutes  of  Justinian,  are  to  be  found,  nev- 
ertheless, many  sound  economic  statements  which 
are  at  the  foundation  of  our  own  law,  especially 
the  recognition  of  rights  and  usufructs  as  proper- 
ty, under  a  legal  distinction  between  corporeal  and 
incorporeal  things  of  value. 

Christianity  brought  into  Economics  a  new  force. 
In  proclaiming  the  brotherhood  of  man,  it  doomed 
slavery  and  sowed  the  seed  of  an  economic  revo- 
lution. The  early  Christians  freed  their  slaves, 
bought  the  liberty  of  slave  -  converts,  and  held 
wealth  as  a  trust  for  their  fellow-Christians.  Yet 
little  progress  was  made  in  Economics  until  the 
Dark  Ages  gave  way  to  the  Renascence.  Aristo- 
tle was  revived  by  the  schoolmen,  and  theologians 
such  as  St.  Thomas  Aquinas  discussed  money  and 
kindred  themes.  Feudalism  and  serfage  bound 
men  to  lords  and  the  land.  The  general  drift  of 
nations  was  in  favor  of  "  the  mercantile  system  " 
of  discouraging  the  export  of  money  and  the  im- 
port of  goods,  so  that  "  the  balance  of  trade  "  might 
be  favorable.  France,  from  1300  on,  was  its  spe- 
cial apostle.    The  Jews  of  the  Middle  Ages — sav- 


HISTORY  AND  LITERATURE  OF  ECONOMICS.  247 

ing,  banking,  trading,  and  lending — were  the  com- 
mercial missionaries  of  those  times,  but  they  were 
hounded  as  common  prey  throughout  Christian 
nations.  With  the  discovery  of  America,  the  in- 
vention of  printing,  and  the  Reformation,  came  also 
the  dawn  of  economic  freedom.  The  Italian  cities 
and  the  Hanse  towns  of  Germany,  commercial 
and  banking  centres,  developed  commerce,  and  the 
German  guilds,  nourishing  the  industrial  arts,  pro- 
duced a  race  of  burghers  stout  to  resist  and  break 
away  from  the  feudal  despotism.  One  of  the  chief 
episodes  of  the  Reformation  was  the  controversy 
as  to  usury,  in  which  Luther  held  to  the  Catholic 
theory  that  a  loan  was  essentially  gratuitous,  while 
Calvin  declared  boldly  for  free  interest  and  against 
usury  laws.  The  theory  of  money  was  indeed  the 
absorbing  question  of  economic  discussion  up  to 
modern  times,  but  throughout  this  middle  period 
the  germs  of  the  modern  industrial  development 
were  quietly  growing. 


XXIX. 


THE  MODERN  HISTORY  AND  LITERATURE  OF 
ECONOMICS. 

MODERN  Economics  may  be  said  to  have  begun 
in  France.  Sully,  the  finance  minister  of  Henry 
IV.,  developed  on  the  mercantile  system  a  general 
plan  of  administration,  and  two  years  after  his  re- 
tirement Montchretien  published  at  Rouen,  in 
1613,  the  first  systematized  general  "  Political 
Economy."  Sully  reduced  taxation,  to  promote 
prosperity  and  increase  revenue,  and  by  this  course 
paid  off  the  national  debt  of  $66,000,000  in  a  few 
years.  He  fostered  agriculture,  improved  roads, 
dug  canals,  and  provided  means  of  transport.  But 
he  opposed  manufacture,  passed  sumptuary  laws, 
and  discouraged  trade  with  other  nations.  Colbert, 
the  minister  of  Louis  XIV.,  followed  Sully  in  re- 
ducing and  simplifying  imposts,  that  the  public 
treasury  might  prosper  with  private  prosperity; 


MODERN  HISTORY  OF  ECONOMICS.  249 

in  reforming  the  public  business,  in  promoting 
agriculture  and  internal  transportation,  and  in  as- 
suring security  to  trade.  But  he  also  glorified 
manufacture  and  commerce,  and  in  his  eagerness 
to  serve  the  former  devised  the  first  protective 
tariff*  of  1667  and  became  the  pioneer  of  the  pro- 
tective system.  The  Paris  merchants  opposed  his 
plan,  pointing  out  that  "  excessive  taxes  cause  a 
loss  on  the  whole  of  what  is  gained  on  the  parts ;" 
that  workmen  cannot  profit  "  without  the  help  of 
foreigners,  who  furnish  all  the  fine  wools,  for  we 
have  only  coarse  ones,"  as  well  as  other  raw  ma- 
terials ;  and  that  "  foreigners  will  not  fail  to  re- 
taliate," so  that  "our  workmen  will  be  without 
employment."  The  Dutch  did  retaliate  ;  war  fol- 
lowed, agriculture  suffered.  After  Colbert's  death 
tax  abuses  again  multiplied  "  till,"  said  Vauban,  "  a 
tenth  of  France  were  beggared,  five-tenths  were 
scarcely  better  off,  three-tenths  were  straitened; 
of  the  remainder,  a  hundred  thousand  families,  not 
ten  thousand  were  at  ease." 

At  this  time  arose  the  first  great  school  of  econ- 
omists, the  Physiocrats  (so  called  because  they  be- 
lieved in  natural  laws),  led  by  Quesnay,  the  surgeon 
of  Louis  XV.,  and  by  Gournay,  a  merchant.  Ques- 


250  ECONOMICS  FOR  THE  PEOPLE. 

nay,  a  great  economic  writer,  considered  liberty 
and  property  the  cardinal  points  of  natural  law, 
and  the  cultivators  of  the  soil  as  essentially  the 
productive  class.  Gournay,  the  author  of  the 
phrase,  " Laissez  faire,  laissez  passer"  which  be- 
came the  cry  of  the  French  merchants  and  after- 
wards the  motto  of  a  school,  said  that  manufactures 
and  commerce  were  also  productive :  both  agreed 
on  a  single  direct  tax  on  land  as  the  true  source 
of  revenue.  Turgot  accepted  their  theories,  de- 
veloped them  in  his  great  work  on  "  Riches,"  and 
applied  them  practically  as  minister  of  Louis  XVI. 
He  freed  the  trade  in  grain  and  gave  full  liberty 
to  manufactures,  but  fell  from  power  before  put- 
ting the  land-tax  into  operation,  in  1776,  in  which 
year  the  centre  of  economic  thought  crossed  to 
England.  Later  treatises,  however,  by  Condillac, 
J.  B.  Say,  Bastiat,  the  most  luminous  of  all  eco- 
nomic writers,  particularly  in  distinguishing  be- 
tween "  that  which  is  seen  and  that  which  is  not 
seen,"  Chevalier,  Leon  Say,  and  others,  have  kept 
up  the  line  of  French  thought.  The  French  Rev- 
olution, especially  with  its  unhappy  experiences  as 
to  paper-money,  furnishes  one  of  the  most  instruct- 
ive of  all  object-lessons  in  Economics. 


MODERN  HISTORY  OF  ECONOMICS.        25  I 

The  greatest  of  all  economic  writers  is  Adam 
Smith,  whose  "  Wealth  of  Nations"  was  published 
in  1776,  the  year  of  the  Declaration  of  Independ- 
ence. He  gathered  and  co-ordinated  all  existing 
materials,  reformed,  added  to,  and  applied  the 
science.  Sir  Walter  Raleigh  and  others,  in  the  six- 
teenth century,  Locke,  Hobbes,  Sir  Joshua  Child, 
and  others,  in  the  seventeenth,  and  in  the  early  part 
of  the  eighteenth  the  idealist  Berkeley,  Francis 
Hutchison,  who  preceded  Adam  Smith  in  the 
Glasgow  chair  of  Moral  Philosophy,  and  others, 
had  contributed  to  English  economic  literature, 
but  Adam  Smith  included  and  superseded  their 
work.  He  "stands  in  the  centre  of  economic  his- 
tory;" whatever  was  written  before  was  the  prep- 
aration for,  and  after,  the  complement  of  his  work, 
says  Roscher.  The  " Wealth  of  Nations"  recog- 
nizes the  productiveness  of  all  forms  of  industry; 
it  expresses  the  natural  or  industrial  system  found- 
ed on  labor.  It  discriminates  between  value  in 
use  and  value  in  exchange,  emphasizes  the  division 
of  labor,  and  advocates  liberty  as  the  key  to  pros- 
perity. After  inducing  principles  from  the  facts 
of  history,  it  deductively  applies  these  principles 
to  government  and  business,  assigning  to  the  State 


252  ECONOMICS  FOR  THE  PEOPLE. 

limited  functions  as  to  education,  public  works,  etc. 
Next  to  Adam  Smith,  Malthus,  writing  on  "  Pop- 
ulation," and  showing  its  natural  increase  in  geo- 
metrical proportion  ;  and  Ricardo,  the  author  of 
a  general  "  Political  Economy,"  but  known  chiefly 
by  his  doctrine  of  Rent,  which  shows  that  rent  is 
not  a  factor  in  price,  are  the  great  English  econo- 
mists of  the  last  century. 

Their  chief  disciple  was  John  Stuart  Mill  (the 
son  of  James  Mill,  also  an  economic  writer),  whose 
"Principles  of  Political  Economy"  is,  next  to  the 
"  Wealth  of  Nations,"  the  greatest  of  economic 
works.  This  comprehensive  treatise  is,  indeed, 
the  chief  modern  authority  in  Economics.  "It 
accords,  in  the  main,  with  the  doctrines  of  Smith, 
Malthus,  and  Ricardo,  but  these  are  amplified,  cor- 
rected, and  enriched  by  Mill's  separate  investiga- 
tions." His  work  is  particularly  valuable  for  its 
application  of  principles  to  practical  social  ques- 
tions, as  wages  and  the  condition  of  working-men. 

Tooke,  who  wrote  the  "  History  of  Prices  ;"  Lord 
Overstone,  the  chief  advocate  of  the  currency  prin- 
ciple adopted  in  the  Bank  Act  of  1844;  McCul- 
loch,  author  of  the  "  Dictionary  of  Commerce " 
and  of  a  bibliography  of  Economics ;  Archbishop 


MODERN  HISTORY  OF  ECONOMICS.  253 

Whately,  who  wrote  an  elementary  treatise ;  and 
N.W.  Senior,  who  analyzed  cost  of  production  and 
developed  the  now  exploded  wage -fund  theory, 
were  all  important  writers  of  the  same  genera- 
tion. The  group  of  men,  headed  by  Richard  Cob- 
den  and  John  Bright,  disciples  of  Adam  Smith, 
who,  joined  by  Sir  Robert  Peel,  in  1846  repealed 
the  corn -laws,  accomplished  one  of  the  great- 
est practical  triumphs  that  economic  study  has 
wrought ;  from  this  movement  came  the  "  Man- 
chester school  "  of  a  priori  or  "  orthodox  "  econo- 
mists, who  emphasized  general  principles  and  car- 
ried the  doctrine  of  laisscz  /aire  to  an  extreme 
which  has  caused  some  reaction. 

Of  later  English  writers,  now  writing  or  who 
have  but  recently  ceased  their  work,  the  more 
prominent  are  Herbert  Spencer,  whose  great  sys- 
tem of  philosophy  supports  the  extreme  laissez 
fairc  doctrine  in  Economics ;  Thornton,  whose 
book  "  On  Labor"  caused  Mill  to  abandon  the 
wage-fund  doctrine ;  Cairnes,  who  has  newly  ex- 
amined the  "  Leading  Principles  of  Political  Econ- 
omy "  and  applied  "  The  Logical  Method  "  with 
brilliant  results;  Jevons,  who  applied  mathemat- 
ical treatment  in  his  "  Theory  of  Political  Econo- 


254  ECONOMICS  FOR  THE  PEOPLE. 

my,"  wrote  a  useful  "  Primer  "  and  a  valuable  study 
of  "  Money  and  the  Mechanism  of  Exchange 
Cliffe-Leslie,  a  representative  of  the  German  his- 
torical school,  and  a  determined  opponent  of  the 
Manchester  economists  ;  Thorold  Rogers,  with  his 
informing  "  History  of  Agriculture  and  Prices," 
and  one  of"  Work  and  Wages  "  in  England  ;  Bage- 
hot,  editor  of  The  Economist,  and  a  clear  writer  on 
banking  and  other  economic  topics ;  Professor 
Fawcett  and  his  wife,  with  their  "Manual"  and 
"Political  Economy  for  Beginners;"  and  Mr.  and 
Mrs.  Marshall,  with  their  popular  presentation  of 
"The  Economics  of  Industry."  The  vagaries  of 
John  Ruskin,  the  art -writer,  do  not  prevent  his 
"Crown  of  Wild  Olive,"  "Unto  this  Last,"  and 
other  semi- economic  writings  from  becoming 
sources  of  inspiration  to  those  who  study  Eco- 
nomics as  a  means  of  bettering  the  condition  of 
men. 

The  tendency  among  later  English  writers  to 
rebel  from  the  extreme  a  priori  school,  which  em- 
phasizes general  principles,  has  been  still  more  evi- 
dent in  Germany,  which  is  now  the  most  active 
centre  of  economic  thought.  The  "  orthodox  " 
economists   found  vigorous   coworkers  in  Rau, 


MODERN  HISTORY  OF  ECONOMICS.  2$$ 

Hermann,  Prince-Smith,  and  others,  but  the  newer 
"  historical"  or  "  national  "  school,  which  holds  that 
economic  science  must  be  founded  on  historical 
experience  and  the  collection  of  facts,  has  enrolled 
such  writers  as  Roscher,  author  of  one  of  the  great 
modern  treatises,  Hildebrand,  and  Knies.  List, 
who  wrote  a  "  National  System  of  Political  Econ- 
omy," was  notably  an  advocate  of  protection,  pre- 
ceding the  American  Carey.  The  school  of  the 
professorial  socialists  (socialists  of  the  chair),  Wag- 
ner, Engel,  and  others,  who  advocate  State  indus- 
try, has  already  been  mentioned  as  the  philosoph- 
ical authority  for  Bismarck's  semi-socialist  political 
policy  of  protection,  State  insurance,  and  the  like. 
Italy  has  produced  also  a  long  line  of  brilliant  eco- 
nomic scholars  and  writers,  but  the  political  posi- 
tion of  Italy  up  to  recent  years  has  prevented 
them  from  being  known,  except  to  special  stu- 
dents of  the  science. 

The  independence  of  the  United  States  grew 
out  of  "  taxation  without  representation,"  and  eco- 
nomic questions  have  played  a  large  part  in  our 
history.  In  fact,  during  the  period  1816  to  1844, 
the  lines  between  political  parties  were  drawn  al- 
most entirely  upon  questions  of  trade  and  finance, 


256  ECONOMICS  FOR  THE  PEOPLE. 

and  since  the  restoration  of  the  Union  economic 
issues  are  again  becoming  paramount.  The  pro- 
tective policy,  initiated  by  Hamilton  with  an  aver- 
age tariff  of  8^-  per  cent.,  but  opposed  by  Gallatin, 
has  held  sway,  despite  two  revenue-tariff  periods, 
to  the  present,  with  its  tariff  averaging  46  per  cent., 
notwithstanding  the  freedom  of  commerce  among 
the  States.  It  has  found  its  ablest  modern  advo- 
cate in  H.  C.  Carey,  the  most  famed  of  American 
economists,  also  notable  for  his  doctrine  of  increas- 
ing production  of  land,  in  opposition  to  Malthus's 
theory  of  diminishing  returns.  American  econo- 
mists have  consequently  grouped  themselves  for 
the  most  part  on  one  side  or  the  other  of  this  pol- 
icy. The  most  notable  general  treatises  are  those 
of  Professor  Perry,  whose  interesting  volume  has 
met  with  wide  sale ;  of  F.  A.  Walker,  an  able 
writer  also  on  "  Money  "  and  "  Wages  ;"  and  Simon 
Newcomb,  who  adopts  the  mathematical  method. 
These  are  free-traders.  Other  special  writers  on 
this  side  are  D.  A.  Wells  and  W.  G.  Sumner  (in 
his  "  History  of  Protection5').  Horace  Greeley, 
R.  E.  Thompson,  and  E.  H.  Roberts  (on  "  Govern- 
ment Revenue  ")  write  as  protectionists. 

A  school  of  younger  men,  dealing  largely  with 


MODERN  HISTORY  OF  ECONOMICS.  257 

facts  on  the  German  method,  includes  R.  T.  Ely 
(on  u Socialism  "),  F.  W.  Tausig  (on  the  "  History 
of  the  Tariff  and  J.  L.  Laughlin  (on  the  "  His- 
tory of  Bi-metallism  ").  Henry  George,  giving 
new  color  to  old  doctrines  in  his  "  Progress  and 
Poverty,"  which  deals  with  the  land  question  and 
urges  its  taxation  to  the  full  extent  of  rent,  is 
the  most  widely  read  economic  writer  of  the  pres- 
ent day.  The  early  political  controversies  on  the 
National  Bank,  the  slavery  question  culminating 
in  civil  war,  the  greenback  issue,  and  now  the  sil- 
ver and  tariff  questions,  suggest  how  closely  the 
American  voter  is  concerned  in  Economics,  and 
how  necessary  it  is  that  every  American  should 
carefully  study  its  principles  for  himself. 

17 


XXX. 


"the  end  of  the  whole  matter.59 

The  end  of  Economics  is  Wealth.  But  Wealth 
is  not  an  end  in  itself ;  it  is  a  means  towards  life. 
"  Humanity/'  said  Kant, "  is  always  to  be  treated 
as  an  end,  never  as  a  means  merely.,,  To  make 
Wealth  the  end  of  life,  to  reduce  man  to  a  mere 
wealth-creating  machine,  is  a  crime  against  human- 
ity. It  is  the  suicide  of  society — the  same  suicide 
which  the  miser  commits  when  he  paralyzes  his 
body  and  starves  his  soul  in  his  delirium  for  gold. 
The  use  of  the  commonwealth  is  to  produce  strong 
national  life — the  greatest  abundance  among  men 
of  healthy  and  happy  individual  life.  "  The  Sab- 
bath was  made  for  man  ;  and  not  man  for  the  Sab- 
bath :"  this  is  true  also  of  wealth  and  of  Econom- 
ics. The  economic  law  is  subject  to  the  higher 
law,  and  Economics,  as  an  art,  is  a  means  of  state- 
craft and  is  reviewable  by  Ethics.    "  Morals,"  said 


"THE  END  OF  THE  WHOLE  MATTER."  259 

a  great  French  thinker,  "  precedes  and  dominates 
political  economy  as  it  precedes  and  dominates 
politics  and  law." 

The  study  of  the  principles  of  Economics  and 
of  economic  history  reveals  great  natural  laws, 
persistent  in  operation,  relentless  in  punishing  the 
transgressions  of  nations  or  of  men,  yet  varied  in 
application  with  the  changes  of  circumstance.  For 
a  law  is  not  less  a  law  because  its  action  is  modi- 
fied or  limited  by  other  laws.  The  great  force  in 
Economics,  the  great  motive  of  human  activity,  is 
found  in  the  desire  to  get  most  with  least  labor, 
making  the  most  of  the  gifts  of  nature  by  the  proc- 
ess of  exchange,  to  satisfy  the  ever  increasing  va- 
riety of  human  wants — applying  labor  to  land  to 
produce  wealth,  saving  that  wealth  as  capital  to 
make  labor  easier,  utilizing  brains  to  the  same  end, 
and  paying  each  its  share  according  to  the  inevi- 
table law  of  supply  and  demand.  This  is  the  law 
of  the  part,  of  individualism,  the  centrifugal  tend- 
ency of  each  atom  to  keep  on  its  own  way  and 
"  look  out  for  itself."  But  against  this  law  of  nat- 
ure is  set  over  another,  the  law  of  the  whole,  of 
commonalty,  the  centripetal  attraction  which  holds 
each  atom  to  its  path  in  the  system  of  which  it  is 


26o  ECONOMICS  FOR  THE  PEOPLE. 

a  part.  The  higher  law  of  humanity,  ethical  in  its 
nature,  and  of  a  scope  beyond  the  individual  life, 
modifies  desire,  limits  the  self -force,  and  creates 
new  conditions  of  demand.  Thus  the  direction  of 
human  endeavor  is  finally  determined  less  by  in- 
dividual self-interest  in  itself  than  by  the  common- 
sense  of  the  community,  voiced  in  public  opinion, 
which  defines  to  the  individual  what  his  self-inter- 
est is.  In  all  ages  of  the  world  custom,  whose 
modern  name  is  Mrs.  Grundy,  has  "  laid  down  the 
law."  There  would  be  no  misers  in  a  community 
which  did  not  value  gold. 

The  foundation  of  society  and  of  each  State  is 
its  industrial  system.  The  ancient  States,  based 
industrially  on  slavery,  regarded  in  their  political 
economy  the  few  and  not  the  many.  They  were, 
as  the  mathematicians  phrase  it,  in  unstable  equi- 
librium :  the  time  of  their  fall  came.  Christianity, 
calling  upon  each  man  to  be  free,  and  to  see  in 
every  other  man  a  brother,  gave  to  the  State  its 
possibilities  of  full  development.  But  it  required 
many  generations  for  this  seed  to  come  to  full 
fruit.  The  Dark  Ages  intervened,  with  their  tran- 
sitional slavery,  holding  the  serf  slave  to  the  soil. 
Then,  with  the  circumnavigation  of  the  world,  the 


"THE  END  OF  THE  WHOLE  MATTER."     26 1 

Copernican  theory  of  the  great  universe,  the  dis- 
covery of  the  central  law  of  gravitation,  came  the 
rounding  out  of  humanity,  the  development  of  a 
new  economic  system,  and  the  fulfilment  of  free- 
dom in  free  industrial  competition,  which  is  the 
foundation  of  modern  society.  Despite  the  wast- 
ing of  nations  by  dynastic  wars,  and  against  en- 
deavors from  all  sides  to  restrict  and  thwart  it, 
this  principle  of  development  has  been  holding  its* 
own  and  making  its  way;  we  now  recognize  the 
protection  of  individual  liberty  as  the  central  idea 
of  the  State.  But  we  begin  to  see  also  that  it  is 
not  the  sole  law.  With  the  idea  of  individual  free- 
dom is  involved  the  idea  of  personal  responsibility. 
The  freeman  is  a  part  of  the  State.  The  individ- 
ual good  must  be  a  part  of  the  general  good.  In- 
dependence involves  interdependence.  The  chain 
is  only  as  strong  as  its  separate  links.  Even  in  the 
strictest  economic  sense,  each  man's  prosperity  is 
bound  up  in  the  prosperity  of  all. 

The  ideal  State,  towards  which  modern  society 
is  more  and  more  conforming,  thus  resides  neither 
in  the  brutal  selfishness  that  leaves  "  every  man  to 
himself,  and  the  devil  take  the  hindmost,"  nor  in 
the  paternal  socialism*  which  by  restricting  individ- 


262  ECONOMICS  FOR  THE  PEOPLE. 


ual  development  would  destroy  the  motive-power 
of  progress.  It  is  a  " happy  mean"  of  practical 
limitations.  The  modern  industrial  organization, 
on  which  the  State  rests,  is  a  vast  complexity  of 
individuals,  worked  out  through  the  principle  of 
freedom  under  existing  institutions  and  laws.  This 
machinery  is  for  the  most  part  automatic,  and  takes 
care  of  itself;  interference  is  disastrous.  But  like 
every  complex  mechanism,  it  requires  precautions 
against  friction,  replacements,  and  readjustments. 
A  product  of  mind  acting  in  line  with  nature,  it 
must  be  ordered  by  mind  acting  in  line  with  nat- 
ure. When  the  social  machinery  grinds  out  injus- 
tice, abuses  men,  makes  the  rich  richer  and  the 
poor  poorer,  the  community  practically  will  not 
accept  the  extreme  laissez  faire  theory;  it  will  not 
let  ill  enough  alone,  but  will  apply  factory  acts  to 
right  wrongs.  The  evils  that  society  has  done,  so- 
ciety must  undo.  On  the  other  hand,  the  common 
sense  also  rejects  not  only  the  impossible  commun- 
ism which  would  reduce  the  industrious  and  the 
idle  to  a  common  level,  but  also  the  socialism  which 
would  put  the  greater  portion  of  the  social  work 
under  control  of  the  State,  instead  of  leaving  it  to 
individuals.   Between  the  two  lies  the  actual  work- 


"THE  END  OF  THE  WHOLE  MATTER."  263 

ing  social  system,  varying  among  different  peoples 
and  at  different  times,  but  persistently  in  accord 
with  the  underlying  economic  laws,  and  never  for 
any  considerable  time,  in  any  stable  State,  against 
them.  This  is  controlled  always  by  public  opin- 
ion, the  aggregate  of  individual  intelligences,  in  its 
turn  directed  by  education  and  by  the  mastery  of 
leadership.  And  thus  the  promotion  of  economic 
progress  resolves  itself  into  the  work  of  political 
education. 

The  history  of  nations  shows  a  continuous  move- 
ment forward,  checked  at  times  by  tides  of  reac- 
tion, and  crossed  here  and  there  by  eddies  of  loss. 
For  progress  involves  change,  and  change  waste, 
and  waste  loss.  By  such  loss  we  gain.  The  old 
machine  is  only  old  iron,  but  the  new  more  than 
makes  up  the  loss.  Yet  when  it  is  a  human  ma- 
chine, with  wife  and  children  also  to  be  fed,  which 
is  for  the  time  put  aside  by  new  labor-saving  ma- 
chinery or  superior  skill,  no  philosophy  can  miti- 
gate the  hardness  of  life  to  that  man.  He  is  face 
to  face  with  the  relentless  facts  of  that  natural  but 
necessary  order  which  destroys  one  farmer's  crops 
by  the  storm  which  saves  another's,  and  accepts 
no  ransom  to  stay  Death  from  the  rich  man's 


264  ECONOMICS  FOR  THE  PEOPLE. 

child.  Socialism  would  be  but  a  disastrous  reme- 
dy; his  help  is  in  the  providence  that  compels 
thrift  and  saving,  in  the  mutual  helpfulness  of  such 
benefit  associations  as  the  trades-unions,  and  in  an 
increasing  care  by  employers  for  the  interests  of 
labor.  Soon  the  balance  is  restored.  The  men 
thrown  out  of  work  are  usually  the  least  skilled  ; 
product  being  increased,  those  who  are  left  get  a 
part  of  the  benefit  in  higher  wages.  In  1804  the 
weavers  of  Lyons  mobbed  Jacquard,  because  he 
had  invented  a  labor-saving  loom;  but  soon  it 
gave  employment  to  thousands  more ;  now  they 
see  that  he  has  been  their  greatest  benefactor. 
There  were  riots  against  the  spinning-jenny,  but 
now  every  man  can  have  two  shirts  who  before 
had  one  or  none.  Presently  the  discharged  men 
adapt  themselves  to  new  employment,  the  increase 
of  demand  gives  them  new  work,  and  the  increase 
of  product  makes  them  better  off.  Progress  is 
justified  by  its  results. 

The  purpose  of  modern  States  is  "  the  greatest 
good  of  the  greatest  number ;"  statesmen  there- 
fore concern  themselves  largely  with  the  condition 
of  "the  working-classes,"  who  are  the  great  body 
of  the  people.    The  laborer,  however,  complains 


"THE  END  OF  THE  WHOLE  MATTER."  265 

that  in  these  modern  days,  with  all  sorts  of  labor- 
saving  machinery,  he  neither  is  better  paid  nor  can 
live  better  nor  can  take  leisure ;  while  the  rich  are 
getting  richer,  the  poor  are  getting  poorer.  This 
is  partly  true  and  partly  not  true.  Absolutely,  the 
laborer  is  better  off  than  a  generation  or  a  century 
ago ;  the  facts  show  that  he  is  better  paid,  better 
housed,  clothed,  and  fed,  even  at  the  worst,  and 
works  fewer  hours.  But  with  this  advance  his  de- 
sires have  increased  in  even  greater  proportion  ; 
he  sees  the  luxury  of  the  rich,  and  feels,  relatively, 
worse  off  than  he  ought  to  be.  Labor,  in  fact,  has 
not  profited  by  civilization  as  it  should  have  done. 
The  reason  is  found  chiefly  in  false  economic  sys- 
tems and  bad  legislation.  While  legislation  cannot 
increase  product,  but  can  only  divert  work  from 
one  channel  to  another,  it  can  decrease  productiv- 
ity ;  it  is  easier  to  break  down  than  to  build  up,  as 
a  fire  destroys  in  an  hour  the  work  of  years. 

There  are  three  ways  of  increasing  present  pros- 
perity—  by  discounting  the  future  and  leaving 
other  generations  to  pay  our  debts  ;  by  increasing 
product,  which  is  accomplished  by  bettering  our 
industrial  organization;  or  by  better  distribution, 
which  depends  largely  on  the  social  control.  The 


266  ECONOMICS  FOR  THE  PEOPLE. 

statesman's  care  must  ever  be  to  promote  the  nat- 
ural means  of  the  general  distribution  of  wealth  by- 
levelling  up  the  body  of  the  people.  The  possibil- 
ities of  Life  given  by  Wealth  to  a  nation  depend, 
indeed,  not  merely  upon  its  amount,  but  largely 
upon  its  distribution  among  classes.  A  State  in 
which  Croesus  with  his  millions  dominates  millions 
of  penniless  poor  has  little  national  life  and  even 
less  economic  force.  It  is  not  the  cost  of  Croesus 
to  the  community  in  what  he  consumes  that  makes 
the  difference,  for,  as  Mr.  Astor  once  said,  he  can 
himself  utilize  "only  a  fair  salary  for  taking  care 
of  his  own  fortune,"  and  his  consumption  is  only 
his  food,  his  clothes,  the  value  of  what  he  wears 
out.  It  is  the  enormous  power  of  directing  in- 
dustry and  the  distribution  of  product  in  one  di- 
rection rather  than  another  that  gives  him  his  in- 
fluence on 'the  common  welfare.  It  is  only  the 
abuse  of  riches  that  is  a  Juggernaut,  crushing  la- 
bor ;  capital,  well  used,  is  its  best  helper.  "  There 
are  busy  rich  and  idle  poor,"  says  Ruskin,  in  show- 
ing that  neither  class  is  in  itself  virtuous  or  vicious. 
So,  too,  there  are  good  fortunes  and  bad  fortunes. 
Of  the  three  great  fortunes  of  this  country,  the 
Vanderbilt  fortune  had  its  origin  in  real  serv- 


"THE  END  OF  THE  WHOLE  MATTER:''  267 

ice.  Commodore  Vandcrbilt's  development  of 
the  through-line  railroad  system  now  brings  a  bar- 
rel of  flour  from  Chicago  to  the  Atlantic  at  a  cost 
reduced  from  two  dollars  to  sixty  cents,  and  his 
returns  were  but  a  part  of  the  savings  to  the  com- 
munity. On  the  other  hand,  the  Astor  fortune, 
though  begun  by  trading,  came  chiefly  from  the 
rise  of  land  in  New  York  City  by  "  unearned  incre- 
ment ;"  and  the  Gould  fortune  is  the  result  of 
"  speculation,"  without  service  to  the  community. 
The  exorbitant  fortunes  of  recent  years  have  come 
chiefly  from  two  sources:  the  unearned  increment 
of  land  "held  for  the  rise,"  and  gambling  in  corpo- 
rate franchises  granted  by  the  people ;  while  the 
poor  have  been  made  poorer  by  a  vicious  tax  sys- 
tem which,  in  its  roundabout  and  concealed  way, 
took  from  the  poor  man  much  more  in  proportion 
than  from  the  rich.  It  is  inevitable,  therefore,  that 
legislation  in  the  future  must  look  to  the  interests 
of  the  many  rather  than  the  few ;  and  still  more, 
that  public  opinion,  stronger  than  law,  will  hold 
each  man  to  responsibility  in  proportion  to  his 
power. 

There  is  nothing  more  dangerous,  however,  in  a 
Government  of  and  by  and  for  the  people  than  a 


268  ECONOMICS  FOR  THE  PEOPLE. 

mistaken  notion  that  any  nostrum  will  prove  a  cure 
for  all  ills,  or  that  we  can  overcome  altogether  the 
relentless  discipline  of  nature.  Under  the  best  sys- 
tem of  government  we  cannot  rid  ourselves  of  its 
cost,  and  the  even  distribution  of  all  wealth  among 
our  whole  people  would  increase  the  earnings  of 
each  but  a  few  cents  a  day.  It  is  by  re-forming 
our  political,  industrial,  and  social  system  step  by 
step,  as  opportunity  presents  itself,  not  by  destruc- 
tive revolution,  that  each  worker  will  get  the  most 
of  life  possible  for  him.  Education,  honest  admin- 
istration, the  prevention  of  waste,  the  bettering  of 
the  conditions  of  work,  are  the  great  means  by 
which  each  man  willing  to  work  will  get  work,  and 
with  it  a  wage  that  will  give  him  opportunity  for 
leisure,  and  with  that  the  power  to  use  leisure  in 
wholesome  and  happy  life. 

It  is  the  glory  of  our  nation  that  we  prepare  not 
for  War  but  for  Work.  Our  two  great  wars — one 
of  independence,  one  of  emancipation — have  both 
been  waged  that  labor  might  be  free.  Without 
"  foreign  relations"  involving  the  burden  of  great 
standing  armies,  we  have  a  fair  field,  in  peace,  for 
the  unrestricted  prosperity  of  labor.  As  a  wider 
and  wiser  education,  developed  into  controlling 


"THE  END  OF  THE  WHOLE  MATTER."  269 

force  through  public  opinion,  brings  our  national 
life  more  into  line  with  natural  law,  as  we  apply 
in  practice  the  great  sanctions  alike  of  Ethics  and 
Economics,  that  virtue  produces  wealth  and  "  right- 
eousness exalteth  a  nation,"  our  democracy  will 
increase  from  strength  to  strength.  "  In  propor- 
tion," said  Channing,  "  as  Christianity  shall  spread 
the  spirit  of  brotherhood,  there  will  and  must  be 
a  more  equal  distribution  of  toil  and  means  of  im- 
provement." To  that  end  every  American  is  a 
Trustee  for  the  Future. 


A  READING  LIST  OF  BOOKS  ON  ECONOMICS. 


The  reader  who  desires  to  pursue  courses  or  fol- 
low up  special  topics  is  referred  to  the  following : 

General  Works,  Pri?nary :  Jevon's  "  Primer,"  Mrs.  Faw- 
cett's  "  Political  Economy  for  Beginners,"  Perry's 
smaller  "  Introduction  to  Political  Economy." 

 Middle:  Perry's  "  Elements  of  Political  Econo- 
my," Sturtevant's  "  Economics,"  Steele's  "  Outline 
Study,"  Ely's  "  Political  Economy,"  Walker's  "  Po^ 
litical  Economy,"  Andrews's  "  Institutes." 

 Standard:  Smith's  "  Wealth  of  Nations,"  Mill's 

"Principles  of  Political  Economy"  (also  in  abridged 
edition  by  Laughlin),  Carey's  "  Social  Science"  (also 
in  abridged  edition  by  Kate  McLean),  F.  A.  Walk- 
er's "  Political  Economy,"  Simon  Newcomb's  "  Po- 
litical Economy." 

History',  Literature,  and  Method:  Blanqui's  "  History  of 
Political  Economy  in  Europe,"  Cossa's  "Guide  to 
the  Study  of  Political  Economy,"  Laughlin's  "  Study 
of  Political  Economy."  See  also  Perry's  "  Elements," 
and  Laughlin's  edition  of  Mill. 

Reference  Works :  McCulloch's  "  Dictionary  of  Com- 
merce," Lalor's  "  Cyclopaedia  of  Political  Science 
and  Political  Economy,"  the  "  Encyclopaedia  Britan- 
nica,"  and  other  general  cyclopaedias. 


272 


BOOKS  ON  ECONOMICS, 


Statistics:  "  Statesmen's  Year-Book,"  for  all  countries; 
the  "Financial  Reform  Almanac,"  "  Whitaker's  Al- 
manac," the  Statistical  Abstract,  and  other  Govern- 
ment "Blue-books"  for  Great  Britain-;  the  United 
States  Census,  Scribner's  "  Statistical  Atlas,"  based 
on  it,  Spofford's  "American  Almanac,"  the  Gov- 
ernment Public  Documents,  particularly  those  of 
the  Treasury  Department,  and  the  Reports  of  the 
Bureaus  of  Statistics  of  Massachusetts,  New  Jersey, 
and  other  States,  for  America. 

Money  and  Banking:  Jevon's  "  Money  and  the  Mechan- 
ism of  Exchange,"  Bagehot's  "Lombard  Street" 
(the  English  banking  centre),  Bolles's  "Financial 
History  of  the  United  States,"  Sumner's  "History 
of  American  Currency,"  Laughlin's  "  History  of  Bi- 
metallism," Linderman's  "Money  and  Legal-ten- 
der," Horton's  "Gold  and  Silver,"  F.  A.  Walker's 
"Money,"  and  his  smaller  "Money,  Trade,  and 
Industry,"  Wells's  "Robinson  Crusoe's  Money," 
Green's  "Repudiation."  As  elementary  works, 
McAdam's  "Alphabet  in  Finance,"  Newcomb's 
"A  B  C  of  Finance." 

Taxation  and  Revenue:  Wells's  special  Reports  and 
Report  of  New  York  State  Commissioners,  Can- 
field's  "Taxation." 

Tariff:  Young's  special  Report  on  "  Customs -Tariff 
Legislation  of  United  States,"  Taussig's  "  History 
of  the  Present  Tariff,"  Heyl's  "  United  States  Im- 
post Duties  "  (official  tariff). 

 For  Free -trade:  Bastiat's  "Sophisms  of  Protec- 
tion," Wells's  "  Primer  of  Tariff  Reform,"  Sumner's 


BOOKS  ON  ECONOMICS. 


273 


"History  of  Protection, "  Taussig's  "Protection  to 
Young  Industries,"  Grosvenor's  "  Does  Protection 
Protect  ?"  Trumbull's  "History  of  the  Free -trade 
Struggle  in  England,"  Schoenhof's  "  Our  Industrial 
Situation,"  Henry  George's  "  Protection  or  Free- 
trade  ?"  Bowker's  "Economic  Fact- book,"  and 
publications  of  the  New  York  Reform  Club,  52 
William  Street,  New  York. 

 For  Protection :  Stebbins's  "  American  Protection- 
ists' Manual,"  Mason's  "Short  Tariff  History," 
Roberts's  "  Government  Revenue,"  Hoyt's  "  Pro- 
tection vs.  Free-trade,"  Thompson's  "Lectures," 
Carey's  writings,  and  publications  of  the  American 
Protective  Tariff  League,  23  West  23d  Street,  N.  Y. 

Land  and  Rent:  F.  A.  Walker's  "  Land  and  its  Rent," 
Henry  George's  "  Progress  and  Poverty,"  Cox's 
"Free  Land  and  Free  Trade/1 

Labor,  Wages,  etc.:  Thornton  "On  Labor,"  Thorold 
Rogers's  "Work  and  Wages,"  Brassey's  "Work 
and  Wages,"  Atkinson's  "  Distribution  of  Prod- 
uct," Porter's  "  Bread-winners  Abroad,"  Weeks's 
"Labor  Differences  and  their  Settlement"  (arbi- 
tration). 

Co-operation:  Holyoake's  "History  of  Co-operation," 
Acland  and  Jones's  "Working-men  as  Co-opera- 
tors," Barnard's  "  Co-operation  as  a  Business," 
Gladden's  "Working-men  and  their  Employers." 

Communism  and  Socialism :  Ely's  "  French  and  German 
Socialism,"  Woolsey's  "  Communism  and  Social- 
ism," Mill's  "Socialism,"  Sumner's  "What  Social 
Classes  Owe  to  Each  Other  "  (contra). 
18 


I  N  D 


E  X. 


Agriculture,  8. 
American  economists,  256. 
Americans,  155. 
Anarchism,  207. 
Apprenticeship,  64. 
Arable  land,  134. 
Arbitration,  191. 

 Durham  coal,  194. 

 Pittsburg  system,  194. 

Aristotle,  242. 

Artists,  service  of,  10. 

Assignatss  100. 

Astor,  W.  B. ,  266. 

Athenians,  import  duties  of,  241. 

Athens,  Solon's  laws,  144. 

Atkinson,  Edward,  142,  181,  232,  234. 

Bad  times,  97. 
Balance  of  trade,  68,  73. 
Bank  Act  of  1884,  in 

 money,  99. 

 of  Amsterdam,  no. 

 of  England  notes,  101,  in,  115. 

 of  France,  102. 

 of  issue,  in. 

Bankers,  11,  33,  115. 
Banking  principle,  112. 
Bankrupt,  108. 
Banks  and  banking,  107,  114. 
Barter,  2. 

Bastiat,  Frederic,  67,  250. 
Bi-metalists,  85. 
Boycott,  190. 


Brains,  23, 117,  177,  180. 
Brassey,  Sir  T.,  168. 
Brickmakers,  171. 
Brokers,  1 1. 

Brotherhood  of  Locomotive  Engi..^.^ 
1S7. 

Bullion  system,  67. 
Business,  2,  4. 

Capital,  22,  107,  112,  117, 139,  185. 
Carey,  H.  C,  255,  256. 
Carpenters,  170. 
Census,  8,  127. 

Change,  silver  and  nickel,  93. 
Cheap  money,  104. 
Checks,  108. 
Chinese,  155. 
Christian  Socialists,  211. 
Christianity,  18,  246,  260. 
Circulation,  Roman,  86. 
Coal-mining,  160. 
Cobden,  Richard,  17. 
Code  Napoleon,  120. 
Coinage,  83. 

 system,  5S. 

Coins,  92. 

Colbert,  J.  B.,  18,  248 
Collateral,  108. 
Commercial  theory,  75. 
Common  measure  of  value,  78. 
Commonwealth,  4. 
Communism,  207. 
Competition,  59. 


276 


INDEX. 


Competitive  examination,  60. 
Confidence,  100. 
Consumption,  26,  62,  229,  236. 
Convertible  currency,  98,  99. 
Coolies,  168. 
Co-operation,  197. 

 distributive  societies,  198. 

 productive,  200. 

 Rochdale  pioneers,  197,  2x1. 

Co-operative  banking,  204. 

  Building  and  Loan  Association, 

204. 

 enterprises,  25. 

 stores,  205. 

Copper,  81. 
Corn  rents,  89. 
Cost  of  production,  44. 
Cotton-gin,  158. 

 operatives,  171. 

Counterfeiting,  90. 
Credit,  78, 108. 

 money,  100, 105. 

Criminals,  10,  64. 
Currency,  41,  80,  98. 

 principle,  112. 

Custom,  57. 

Dark  Ages,  260. 
Debased  coins,  no. 

 money,  96. 

Debt,  100. 

De  Lamennais,  H.  F.  R.,  211. 
Demand,  43. 
Director,  71,  177. 
Discount,  108. 
Distribution,  26,  62,  117. 
Diversifying  industries,  69. 
Division  of  labor,  154. 
Doctors,  9,  33,  65. 
Dollar,  41,  91. 
Domestic  servants,  9. 
Double  standard,  86. 
Draft,  109. 

Earning  a  living,  7. 


Economic  issues,  256. 
Economics,  definitions,  3  ;  derivation,  4 ; 
early  history  of,  239 ;  modern  history 
of,  248;  not  an  exact  science,  15; 
principles  of,  259. 
Education,  13,  268. 
Employer  and  employed,  184. 
Engel,  Dr.,  233. 
England,  114, 123,  133,  144. 
English  coins,  83. 

 economists,  17, 164. 

 iron  trade,  193. 

 school,  17. 

 writers,  252-255. 

Entail,  121. 
Exchange,  4,  26,  77. 
Exchequer,  108. 
Exports,  Great  Britain,  74. 

 United  States,  74. 

Farm  wages,  170. 

Farmer,  8,  15,  30,  33,  45,  65,  79,  104,  116, 

129,  i54. 
Farming,  123,  169. 
Farms,  121. 
Fiat-money,  104, 106. 
Final  utility,  49. 
Fire  loss,  231. 
Fishermen,  8. 
Foreign  exchange,  109. 

 trade,  66,  68. 

France,  120, 123. 
Free  coinage,  96. 

 trade,  68. 

 traders,  256. 

French  economists,  17. 

 Revolution,  208,  250. 

 statesmen,  67. 

Friction,  57. 

Gamblers,  10,  u. 
Gambling,  n. 

George,  Henry,  136,  225,  257. 
German  school,  18. 
Germany,  209,  212. 


INDEX. 


277 


Glass-workers,  171. 
Godin,  J.  B.  A.,  157,  200. 
Gold,  81,  82, 92. 

 certificates,  98. 

Gould,  Jay,  267. 
Gournay,  250. 

Government,  212,  214,  219,  227. 

 officers,  9,  12. 

Gratuitous  coinage,  95. 
Great  Britain,  120. 
Greece,  144. 
Greeks,  241. 

Greenbacks,  93,  101, 103,  113. 
Gresham's  law,  104. 

Hard  times,  61,  182. 
Head-money,  71. 
Hell  Gate,  153. 
Historical  school,  255. 
History  of  nations,  263. 
Hops,  39. 

Ignorance,  cost  of,  13. 
Immigrants,  20. 
Immigration,  71. 
Imports,  Great  Britain,  74. 

 United  States,  74. 

Inconvertible  currency,  99. 

Insurance,  146. 

Interest,  22, 108,  141,  143,  147. 

International  trade,  65. 

Ireland,  133. 

Irish,  155. 

Jews,  143,  239,  247- 

Knights  of  Labor,  188. 

Labor,  117, 152, 159, 163, 181,  185,  265. 

Laborer,  9,- 265. 

Labor- value,  105. 

M  Laissez  faire"  19,  262. 

Land,  22, 116,  128. 

 question,  257. 

 value,  127. 


Lasalle,  J.  B.  de,  210. 
Latin  Union,  86. 
Lawyers,  10,  33. 
Legal-tender,  86,  92,  100. 
Legendre,  A.  M.,  18. 
Legislation,  173,  226. 
Leisure,  7,  12. 
Liquors,  232. 
Lock-outs,  188. 
Locomotive  engineers,  187. 
Log-rolling,  73. 

Machinery,  60. 
Machinists,  33. 
Malthus,  123,  252. 
Manchester  school,  17. 
Manufacturers,  8. 
Market,  55. 

 price,  51,  52,  54. 

Markets,  52. 
Marx,  Karl,  209. 
Material,  184. 
Mechanic,  65,  104. 
Medium  of  exchange,  77. 
Mercantile  system,  67,  246. 
Merchant,  33,  65,  154. 
Middle  Ages,  67. 

 men,  61. 

Mill,  John  Stuart,  52,  65,  137,  224,  252. 
Miners,  8. 
Mint,  84. 

Money,  41,  58,  76,  79,  102,  104. 
Mono-metalists,  85. 
Mortgaged,  36. 
Multiple  standard,  S8,  89. 
Musicians,  10. 

Napoleon.  See  Code,  120. 
National  banks,  112-114,  257. 

 currency,  112. 

 Labor  Congress,  187. 

 labor  report,  183. 

 school,  255. 

Natural  selection,  60. 
I   system,  67. 


INDEX. 


Nihilism,  207. 

Ricardo,  D.,  96, 101,  252. 

!Normal  price,  54« 

Ricardo's  law  of  rent,  47,  130,  134. 

 law  of  seigniorage,  101. 

Overstone,  Lord,  ii2j  252. 

Rogers,  Thorold,  172. 

Owen,  Robert,  162a 

Rome,  67,  i44>  ^43* 

JrAINTERS,  17O. 

oafe  deposit,  110. 

Panic,  99* 

Sailors,  8,  9,  33. 

Paper  as  money,  98- 

Savings-banks,  114. 

Paper-money,  35>  "3* 

Say,  J.  B.,  67,  250. 

Paupers,  io,  232. 

Scotch  economists,  17. 

Pecuniary,  79* 

Seigniorage,  95* 

Peel,  Sit  Robert,  in. 

Self-interest,  30. 

Pennsylvania  law,  192. 

Servant,  33* 

Physiocrats,  249* 

Service,  8. 

Shakers,  211. 

PolkTcaUconom'  derivation 

onare-wages,  100. 

Po  VlTtioi^UnTted  StateYT'  ^ 
opu  a  lon'    111  e      a  es,  . 

OllCKCl,,  OZ  • 

Post-onice  Department,  114. 

Shoemaker,  77* 

Potatoes,  45>  49* 

Shoe  manufacturer,  162. 

Potter,  Humphrey,  152- 

Silk  industry^  69)  7^* 

Prices,  43,  72,  84^  87,  116. 

Silver,  4*>  81,  82,  92* 

Primogeniture,  121. 

■  certificates,  98- 

Producers,  direct,  8,  33. 

 ■  indirect,  8,  10. 

Sliding  scale    of  payment,  160. 

Product,  21,  22,  163- 

Smith,  Adam,  17)  21,  30,  67)  io3»  126,  i669 

Production,  25,  44;  62,  11 7,  ^54* 

177*  220, 251  • 

Professorial  Socialists,  2 ii5  255' 

Social  Democracy,  209* 

Profit,  23,  72,  177,  179. 

Socialism,  207,  264- 

Protection,  68. 

Socialists,  Christian,  211. 

Protective  policy,  67. 

 Professorial,  211. 

 system,  67. 

Soldiers,  9. 

 tariff,  72. 

Spanish  treaty>  47* 

Protest,  109. 

Specie,  110. 

Proudhon,  148. 

Specific  industries,  156. 

Speculation,  10,  58. 

Railroad-men,  33* 

Spencer,  Herbert,  137* 

Railroads,  8,  9,  120. 

Stamp-business,  1. 

Realize,  99. 

Standard  of  values,  78. 

 silver  dollar,  92. 

Reproduction,  54. 

State  banks,  114. 

Repudiation,  106. 

Statistics,  234. 

Reserve,  99. 

Stewart,  A.  T.,  52. 

Retail  buying,  52. 

Stock,  55. 

Revenue,  72. 

Storer  of  values,  78. 

INDEX. 


2/9 


Strikes,  188. 
Substitution,  57. 
Sugar,  38,  47. 
Supply,  43,  54. 
Suspend  payment,  99. 

Tabular  standard,  88. 
Tariff,  257. 

Tariff  for  revenue,  72. 
Taxation,  214,  220. 
Taxes,  218,  227. 

 excise,  222. 

 income,  223. 

 legacy,  222. 

Teachers,  9. 
Time-wages,  168. 
Token  money,  93. 
Tooke,  Thomas,  112. 
Trade,  9, 169. 

 dollar,  92,  97. 

 foreign,  68. 

Traders,  9. 

Trades-unions,  63,  1S6. 

Transportation,  8. 

44  Truck  system"  of  payment,  160. 

Turgot,  250. 

Tweed  Ring,  217. 

Ulster  tenant-right,  133. 


Unearned  increment,  125,  267. 
United  States,  area  of,  127. 

 coins,  83. 

 money,  90. 

Usury  laws,  144. 
Utility,  31. 

Value,  28,  fx,  38. 
Vanderbilt,  C,  266. 
Village  communities,  119. 

Wages,  22, 159,  167,  170, 175,  184. 

Wall  Street,  11,  146. 

Wants,  29. 

War,  268. 

Wastes,  231. 

Watch-makers,  171. 

Water-power,  127. 

Wealth,  20,  36,  76,  80,  229,  258. 

Weather  science,  15. 

Webster,  Daniel,  106. 

Wheat,  38,  41,  55,  130. 

Women  in  economics,  5,  7,  -  ,  12,  199 

Wool,  39,  40. 

 operatives,  171. 

Work,  22. 
Writers,  10. 

Xenophon,  241. 


THE  END. 


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